Japan's inflation surpasses that of the US for the first time in eight years.

Japan's core inflation rate in June was 3.3%, 0.3 percentage points higher than that of the United States, for the first time since October 2015.

According to newly released data, Japan's core inflation index (excluding fresh food prices) edged up 0.1% in June compared to May, reaching 3.3%. This was primarily due to a sharp increase in electricity prices. However, this increase was still lower than the Bank of Japan's (BOJ) forecast of 3.5%.

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

On July 20, the Japanese government projected that inflation this year could reach 2.6%, higher than the 2% target set by the Bank of Japan; at the same time, it lowered its growth target from 1.5% to 1.3%.

Price pressures in Japan – a country experiencing deflation for the past 30 years – emerged in late 2022 and have not yet subsided. Coupled with the recent movements of the yen, this has further fueled market belief that the Bank of Japan (BOJ) will have to change its stance on monetary easing in the second half of this year.

This week, Bank of Japan Governor Kazuo Ueda signaled that he will maintain easing measures at next week's meeting. This move by Ueda caused the yen to depreciate against the USD, despite signs of an upward trend over the past week.

Yoshiki Shinke, chief economist at the Dai-ichi Life Research Institute, believes that inflation at 3-4% is "no longer low." "Authorities need to take cautious steps, because companies are willing to pass the burden of costs on to consumers," he commented.

Currently, Japan is the only country in the world with negative interest rates. However, maintaining record-low interest rates is putting their policy against the global trend of tightening. In the current context, inflation figures are increasing the likelihood of the BOJ adjusting its monetary policy, which could have certain impacts on global finance.

Minh Anh (according to Financial Times )

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