The Japanese Economy's Start To Banish Stagnation: CPI Eases To 2.2%

The Japanese Economy's Start To Banish Stagnation: CPI Eases To 2.2%

The Japanese Consumer Price Index (CPI), which does not include the price of fresh food, decreased after the Internal Affairs Ministry reported a 2.6 percent year-over-year increase in prices in March.

Vikrant DurgaleUpdated: Saturday, May 25, 2024, 09:56 AM IST
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Bank Of Japan moniters yen's falling price to eradicate stagnation |

The Bank of Japan (BoJ) has persisted in its extremely loose monetary stimulus programs, which aim to eradicate deflation and stagnation from the fourth-largest economy in the world while maintaining a sustainable two percent inflation rate.

The Japanese Consumer Price Index (CPI), which does not include the price of fresh food, decreased after the Internal Affairs Ministry reported a 2.6 percent year-over-year increase in prices in March. For a 25th month, the gauge remained above the BOJ's 2 per cent target.

The data from Friday met market sentiments and comes as Japan's import prices continue to rise due to the weakening yen.

Japan's price increases have been more moderate than those in the US and other major economies, which have recently struggled with extremely high inflation.

Elimination of Negative interest rate

The BoJ eliminated the world's last negative interest rate in March and raised borrowing costs for the first time since 2007, in part because it reached this inflation target.

The Federal Reserve, one of the world's largest central banks, has far higher interest rates than other major banks, and this large difference has put further pressure on the yen.

Excluding energy and fresh food, prices increased by 2.4 percent in April, which was in line with the market estimate and a decrease from 2.9 percent in March.

Japanese Yen's Fall

The Japanese yen has recently fallen to levels not seen in thirty years compared to the US dollar. Although a weaker yen benefits Japanese exporters and foreign visitors, it raises the cost of imports and international travel for tourists departing Japan.

Tokyo's inflation, which serves as a leading indicator for national statistics, unexpectedly fell in April when the local government started providing educational subsidies. For the national gauge, analysts, including those at NLI Research Institute, calculated that the impact of those measures was much less, reducing price gains by 0.1 per cent or less.

BOJ Governer's excerpt

BOJ Governor Kazuo Ueda stated on Thursday that despite the economy's dismal start to the year, the central bank will not stray from its plan to raise interest rates again because a growth rebound is expected.

Prior to a meeting of the Group of Seven finance authorities in Stresa, Ueda informed reporters in Italy that "there is no change in an overall picture so far" for a recovery, Ueda added.

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