Japan's inflation surpasses US for first time in 8 years

Japan's core inflation in June was 3.3%, 0.3 percentage points higher than the US, the first time since October 2015.

According to newly released data, Japan's core inflation index (excluding fresh food prices) in June inched up 0.1% compared to May, at 3.3%. The main reason was a sharp increase in electricity prices. This increase was still lower than the forecast (3.5%) of the Bank of Japan (BOJ).

Meanwhile, US inflation was 3% in June. Thus, for the first time in 8 years, Japanese inflation exceeded that of the US.

On July 20, the Japanese government predicted that inflation this year could reach 2.6%, higher than the 2% level given by the BOJ; at the same time, it lowered the growth target from 1.5% to 1.3%.

Price pressures in Japan, which has been experiencing deflation for the past 30 years, have been building since late 2022 and are continuing to mount. The yen’s recent performance has further fueled speculation that the BOJ will have to change its stance on monetary easing in the second half of the year.

This week, Bank of Japan Governor Kazuo Ueda signaled that he would maintain easing measures at next week’s meeting, a move that sent the yen tumbling against the dollar, despite signs of strength in the past week.

Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute, said inflation at 3-4% was "no longer low." "The authorities need to tread carefully, as companies are willing to pass on the cost burden to consumers," he said.

Japan is currently the only country in the world with negative interest rates. However, maintaining record low rates puts its policy at odds with the global tightening wave. In the current context, inflation data is increasing the probability that the BOJ will adjust monetary policy, which could have certain impacts on global finance.

Minh Anh (according to Financial Times )

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