Japan’s consumer price growth hit a 31-year high amid a weak yen and continued rise in international raw material prices. Concerns over a slowdown in economic growth due to a drop in purchasing power caused by high prices are expected to turn a red light on the Japanese economy.
According to Japan’s Ministry of Internal Affairs and Communications on the 21st, Japan’s key consumer price index (CPI) in September, excluding highly volatile fresh foods, stood at 102.9, up 3.0% from the same month last year (99.9). Excluding the impact of the consumption tax (value-added tax), it is the highest in 31 years and one month since August 1991. Japan’s consumer price growth rate hit the 2% range for the fifth consecutive month from April to August.
The growth rate of food prices excluding fresh food exceeded 4.6% year-on-year, the highest in 41 years and a month since August 1981. Overall energy prices also rose 16.9 percent, with electricity bills rising 21.5 percent and city gas costs rising 25.5 percent.
Japan’s record price increase is attributed to a sharp rise in import prices due to the yen’s recent plunge, in addition to international energy prices and raw material costs that have risen due to Russia’s war in Ukraine since early this year. In particular, the Endaler exchange rate surpassed 150 yen for the previous day and two consecutive days in the Tokyo foreign exchange market, hitting a 32-year high. As the U.S. Federal Reserve recently raised its key interest rate rapidly through the Giant Step, the U.S.-Japan key interest rate gap widened, and the end-dollar exchange rate also failed to avoid an impact.
At a press conference after a cabinet meeting earlier in the day, Japanese Finance Minister Shunichi Suzuki said, “The current high prices could have a significant impact on households and corporate management,” stressing, “We will establish comprehensive economic measures this month, including measures to reduce the burden of electricity and gas bills.” Regarding the all-time low of the yen, he also expressed his intention that the government could intervene in the foreign exchange market, saying, “We will be nervous and watch the trend of the foreign exchange market while taking appropriate responses to excessive fluctuations.”
However, despite the Japanese government’s willingness to take measures against prices, consumer prices are expected to continue to rise for some time. Citing the average forecast of 36 private economists compiled by the Japan Economic Research Center on the 11th, the Nihon Keizai Shimbun said the consumer price index is expected to rise 2.84% in the third quarter compared to the same month last year. It is predicted that the first quarter of next year will continue to rise in the 2% range to 2.47%, and will fall to the 1% range only in the second quarter.
