Bank of Japan Concerned About Inflationary Pressures

Adam Lemon

The Bank of Japan recently released its meeting minutes, in which it said that the price outlook is being affected by the rise of commodity costs. This fact that could eventually push up local consumer prices, which so far have not increased, at least compared to consumer prices in other countries that are reopening their economies.

“Many members said domestic wholesale inflation is rising reflecting global commodity price hikes, which could push up consumer prices down the road,” stated the bank in its minutes, adding that other members claimed that consumer inflation could accelerate by the end of the year as demand recovers.

Rising commodity prices made wholesale prices go up by 5% last month, after rising by 5.1% in May, the fastest growth pace since 2008. These inflationary pressures cast doubts on the bank's current ultra-loose monetary policy stance, though some members of the board pointed out that Japan could still face deflationary pressures such as slow wage growth.

Advertisement
The yen is a popular asset during turbulent times.

This situation is concerning, as some members of the bank's board believe that Inflation could hinder Japan's economic growth, as rising costs for companies could worsen Japan's terms of trade and affect the price and economic outlook.

In its last meeting, the Bank of Japan announced its decision to keep its monetary policy stance unchanged and revealed a plan to create a scheme to fund activities aimed to fight climate change. The bank also decided to revise down its GDP forecast for the current fiscal year from 4% to 3.8%. However, its expectations for next year's economic growth improved, going up from 2.4% to 2.7%.

Japan is currently trying to stop the spread of the COVID-19 virus, which so far has infected 844,014 individuals, including 15,060 deaths. In an attempt to stop the spread, the government has distributed about 71.9 million vaccine doses among the population, fully vaccinating 28.4 million individuals, accounting for 22.5% of the total population.

On Tuesday, Tokyo reported that COVID-19 cases went up by 1,387, the second-highest daily increase since January 21. Because of this reason, the organizer of the Olympics have not ruled out canceling the games, which are set to be inaugurated on Friday. The organizers are expected to host about 11,000 athletes from more than 200 countries, while visitors, journalists and delegates are expected to arrive from overseas.

By 4:38 GMT, the Japanese yen dropped by 0.03% against the US dollar, falling to the 0.909950 level.

Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.
Learn more from Adam in his free lessons at FX Academy

Did you like what you read? Let us know what you think!

exclamation mark

Please make sure your comments are appropriate and that they do not promote services or products, political parties, campaign material or ballot propositions. Comments that contain abusive, vulgar, offensive, threatening or harassing language, or personal attacks of any kind will be deleted. Comments including inappropriate will also be removed.

0 User comments

exclamation mark

Please make sure your comments are appropriate and that they do not promote services or products, political parties, campaign material or ballot propositions. Comments that contain abusive, vulgar, offensive, threatening or harassing language, or personal attacks of any kind will be deleted. Comments including inappropriate will also be removed.

Read more
Add new comment
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.