The increase in Japanese inflation was caused by a surge in global commodity prices, while inflation that did not include the fresh food and fuel categories was still in a negative trend.
On Friday (24/December), Japan's core inflation data was reported to have increased by 0.5 percent on an annual basis (Year-over-Year) in November. This figure managed to exceed expectations of a 0.4 percent increase, as well as a significant jump from the previous month's achievement. Historically, core inflation this time also marked the highest on record since February 2020.
Japan's Core Inflation Touches High 2
The significant increase in Japanese inflation was largely due to the surge in global commodity prices in recent months. Before reaching the consumer level, the increase in global oil prices will first be felt at the producer level. The reason is, producer prices (PPI) are known to skyrocket up to 9.0 percent on an annual basis.
Given that the spike in energy prices is only temporary, this morning's inflation release does not reflect the overall recovery in Japan's economic conditions. This is further confirmed by core inflation data which does not take into account the categories of fresh food and fuel; the report fell 0.6 percent and continued the downward trend from the previous month.
According to analysts, the current inflation rate is still far below the 2.0 percent target, so it will not encourage the Bank of Japan (BoJ) to start considering reducing monetary stimulus.
However, the Japanese government recently revised up its GDP growth forecast from 2.2 percent to 3.2 percent for fiscal 2022. "The economy has shown signs of improving so we need to ensure the current momentum moves towards a sustainable economic recovery," a government official said. Japan in the press yesterday.
Yen Strengthens Limited
Japan's core inflation hit a 2-year record high this morning did little to affect the yen's move against the US dollar. Yen even had time to be depressed before finally managed to push the USD down in a limited movement. Currently, USD/JPY is in the range of 114.33 or 0.02 percent lower than the daily open price.
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