Headline inflation (including energy and food) jumped to 3.7 percent from 3.0 percent the previous month, reaching a multi-year high, government data showed on Friday. Rates are still lower than many other developed countries, but high by Japanese standards. Inflation in Switzerland was 3.0 percent in October.
The Bank of Japan’s 2 percent medium-term price target has clearly been exceeded for some time. However, monetary observers adhere to their view that the increase is merely a temporary phenomenon that does not need to be countered by monetary policy. Central bank governor Haruhiko Kuroda reiterated his position before the Japanese parliament on Friday.
Rising inflation is putting increasing pressure on the central bank, which pursues an unusually loose monetary policy by international standards. This severely weakened the local currency, the yen, and further fueled inflation through more expensive imports. Japan has to import most of its raw materials, so the country is particularly affected by high raw material and energy prices. The export-based economy is also affected by the international economic crisis and contracted in the third quarter.
(SDA)