Inflation in Japan reached the high for 40 years

In October, the growth of consumer prices in Japan exceeded last year's numbers by 3.6%. This is more than 3.5% forecasted by analysts. Such price growth became the most serious since 1982. Currently, the core inflation is higher than the target of the central bank by 2% and this is happening for the seventh month in a row. The fall of the national currency only strengthens this trend.

After the release of statistics, Bank of Japan Governor Haruhiko Kuroda repeated his opinion about low credit rates. He also acknowledged that inflation can rise even more.

Some economists agree with the opinion of the Japanese central bank that next year the inflation rate will decrease. However, several analysts suppose that the Bank of Japan underestimates the situation.

On Friday, Kuroda said prices would increase by less than 2% in the next fiscal year.

Chief market economist Mari Iwashita said it is increasingly difficult for the central bank to say that inflation is temporary. If the national currency remains weak, more firms will try to cover costs at the expense of customers.

According to the last data, the price growth goes beyond the cost of energy. The cost of processed food has already exceeded the price of electricity and fuel.

Last month Prime Minister Fumio Kishida instructed many measures for economic support in the face of rising prices. These measures include helping to reduce energy bills and childcare payments. The Prime Minister's cabinet approved an additional budget of 29.1 trillion yen. This amount is 208 billion when converted into dollars. 

An economist from Bloomberg Economics Yuki Masujima declared that the government doesn’t place pressure on the central bank. Bank tries to save the interest rate on the lowest level to finance debt with new loans. These new loans include funds for economic support measures.

Economists at SMBC Nikko Securities believe that these measures will push the key inflation indicator to 2.5% at the beginning of the new year. As support will be phased out, price increases will likely accelerate to 3% in 2024.