This week, Japan’s Statistics Bureau released its latest Core Consumer Price Index (CPI) report for the country, revealing a rise of 3.5%. The figure comes as a surprise to analysts who had expected a more modest 2.9% for the quarter’s end. It should be noted that inflation in Japan has been rising steadily since June 2021. The timing of this rise is also notable, as Kazuo Ueda recently took over as the 32nd Governor of the Bank of Japan.
The governor of the New Bank of Japan faces rising inflation, and the central bank conducts a review of monetary policy measures
In April, Japan saw its inflation rate rise year-on-year – excluding fresh food and energy prices – which increased to 3.5%. This deteriorating rate of inflation is a concern for the Bank of Japan (BOJ), which, like many central banks around the world, aims to bring the rate back to the 2% range. However, the country’s economy is facing major challenges, including the repercussions of the Covid-19 pandemic, which has led to significant stimulus measures and lockdown policies.
Moreover, Japan is grappling with A.J Contraction of the workforce, which could significantly affect their ability to sustain economic growth. These challenges are compounded by the fact that the Bank of Japan has a new governor, Kazuo Ueda, who spoke at its first monetary policy meetings on April 27-28. Japan has held since 2016.
The last and final source of excess liquidity
The latest news is likely to add pressure on the Bank of Japan to address the country’s accelerating rate of inflation. However, the central bank stated that it had “decided to conduct a large-scale review” of its monetary policy measures, indicating that it may explore new ways to stabilize the economy. As the Bank of Japan grapples with these challenges, it remains to be seen how it will deal with Japan’s economic future.
“With heightened uncertainties surrounding economies and financial markets at home and abroad, the Bank will patiently continue monetary easing while responding smoothly to developments in economic activity and prices as well as financial conditions.” Bank of Japan announcement notes. “By doing so, it will aim to achieve the price stability target of 2 percent in a sustainable and stable manner, accompanied by wage increases.”
Overall, the country’s latest CPI report highlights the challenges the Japanese economy is facing. On Friday, Hiromi Yamaoka, a former Bank of Japan official, Tell CNBC’s Squawk Box Asia reported that “there is still some uncertainty in Japan’s real economy, but at the same time, inflationary pressures are very imminent.”
Graham Summers, an MBA at Phoenix Capital Research, believes Japan may be the last straw in terms of liquidity. On Friday, summer booksWith inflation rising in Japan, the Bank of Japan will soon be forced to end printing money, which means that the financial system will lose its last and final source of excess liquidity.
What do you think the Bank of Japan’s large-scale review of monetary policy measures will entail, and how do you think it will affect Japan’s economic future? Share your thoughts in the comments section below.
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