Inflation Picked Up In The Land Of The Rising Sun

Inflation Picked Up In The Land Of The Rising Sun
Daniel Johnston

7 months ago2 mins

What’s going on here?

Data out on Friday showed that Japan’s inflation perked up last month.

What does this mean?

Inflation’s often seen as the bad boy of economics, but Japan’s long been pining for that rugged toughie. After all, inflation’s not a total ne’er-do-well: too much can mean you wind up like the West right now, sure, but too little and you risk deflation – an even nastier foe. So April’s data was encouraging: consumer prices picked up by 3.4% from the same time last year, with food prices leading the charge. And that jump would have been even steeper if the government hadn’t stepped in to offset surging gas and electricity costs. What’s more, rising prices haven’t had Japanese households and businesses closing their wallets: data out last week showed that resilient spending last quarter helped drag the nation out of the technical recession it had been languishing in.

Japan inflation

Why should I care?

The bigger picture: Don’t bank on big changes.

The Bank of Japan (BOJ) has been snapping up government bonds for years to trim borrowing costs and kickstart growth. And with this inflation data in, some economists are hoping that the BOJ might bump up inflation forecasts and finally shake its policy up a bit. But let’s not uncork the sake just yet. See, it’s the aftershocks of the pandemic, not the BOJ’s strategic plays, that have nudged inflation upwards – and with exports and manufacturing still feeble, the central bank's unlikely to jeopardize the recovery with a drastic about-face.

For markets: Japan’s jolt.

This news means Japanese stocks are having a bit of a moment, with the country’s Topix index hitting a 33-year high last week. And that’s not surprising: the economy’s dodging stagflation, valuations are in good shape, and growth’s finally back in town. And Warren Buffett’s much-publicized – and very influential – infatuation with Japan can’t have hurt either.

Topix up


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