Inflation in Japan reached 2.1% in April, its highest level in 7 years

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La inflación en Japón llegó al 2,1 % en abril, su nivel más alto en 7 años


© Reuters Inflation in Japan reached 2.1% in April, its highest level in 7 years

Tokyo, May 20 (.).- Prices in Japan rose 2.1% in April and exceeded the elusive Bank of Japan (BoJ) inflation target for the first time in seven years, due to higher energy prices and a weak yen which has skyrocketed the cost of imports.

The consumer price index (CPI) in the Asian country, which excludes fresh food due to its high volatility, increased in April for the eighth consecutive month and at its fastest rate since 2015, according to data published this Friday by the Ministry of the Interior and Communications.

The 2.1% year-on-year increase in prices in April follows the rise of 0.8% in March, 0.6% in February and 0.2% in January.

The increase in energy prices, of 19.1% year-on-year, was the factor that contributed the most to the increase, followed by the increase in the cost of durable recreational goods, of 4.5%. The most notable reduction in price occurred in communication, of 10.9%.

The Japanese archipelago, highly dependent on imports of energy and other raw materials, has seen the costs of its imports rise not only due to the global rise in prices, but also due to a recent strong devaluation of the yen that is making a dent in its purchases and worrying to the private sector for its implications.

This trend, which contributes to fattening the profits of companies linked to exports because it inflates their foreign remittances when repatriating them in yen, also leads to higher prices for the purchase of materials, whose prices have skyrocketed due to the current international situation.

The Russo-Ukrainian war has made imports of energy and other materials more expensive, and the Covid-19 pandemic continues to wreak havoc on supply chains.

In this scenario, Japanese imports increased by 28.2% year-on-year in April, to a record 8.92 trillion yen (65,980 million euros), which led the country to post a trade deficit of 839,166 million yen (6,210 million euros), as reported the day before by the Ministry of Finance.

A TRANSITORY INFLATION?

Inflation in Japan did not exceed the 2% barrier, the elusive goal pursued for almost a decade by the BoJ, since March 2015, when prices were still adjusting to the first increase in value added tax (VAT) in the country in 17 years, which went from 5 to 8% in April 2014.

The tax would experience another rise from 8 to the current 10% in October 2019, which would not replicate the phenomenon and was followed by the economic onslaught of the pandemic.

In 2013, the Japanese central bank launched a broad program of monetary easing to bring inflation to 2%, although this objective was successively delayed due to the fall of the one that followed in subsequent years and the internal situation.

The BoJ, which has already indicated that inflation could shoot up to its target soon but has described it as high transitory, has chosen to maintain its policy, contrary to that of other entities such as the United States or the European, alleging that the rise in prices is product of the specific geopolitical situation.

The entity considers that the current rise in prices does not respond to a rate of salary increases that can sustain internal demand, still fragile, and that maintains inflation in a stable and sustainable manner.

This position, together with the slow economic recovery of Japan from the impact of the covid (in the quarter from January to March the GDP contracted by 0.2%), lead the BoJ to insist on its aggressive policy of monetary stimuli and ultra-low rates , measures that it does not plan to modify in the short term.

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