Japan is set to experience a moderate increase in consumer inflation influenced by rising global commodity prices. The Bank of Japan in their latest release revised the quarterly core consumer inflation index projections from 0.1% to 0.6% which is relatively low compared to the western counterparts currently at 3.4%. 

  • Japan’s capital expenditure and increase in exports balance the terms of trade negatively affected by an increase in commodity prices.
  • According to the Bank of Japan, most Japanese firms are hesitant to pass the cost of production to the consumers. This is contrary to what happens in western economies.
  • In Japan, an increase in the cost of production solely due to the increase in the cost of raw materials is only transitory. 

The BoJ concluded that the upward trend of increase in fuel prices and reduction in traveling fees will most likely push up inflation in the country by the last quarter of the year.

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