Friday, September 30, 2022

Inflation in Japan: is everything okay in Japan? are you kidding me? are you serious when you say that

The world isn’t necessarily beautiful in Nishitokyo, but that’s okay. The city blends seamlessly into the vast, calm sea of ​​rooftops of the Tokyo metropolitan area that extends to the west. Built houses, overcrowded shops. Ukraine, war, really any kind of conflict is far from over. In the morning at Hoya station, when conductors force passengers to board overcrowded trains, something violent happens. But it is also done in line with the national understanding that everything has to fit in some way or the other. Masked crowds run peacefully through the clean, chaotic grays of everyday life, and the shelves in the 24-hour supermarket are always full of rice, fish, miso, and everything the local kitchen needs. All is well in Japan.

Still, Saki Aida, a child care worker in her mid-60s, can’t say she doesn’t feel the Russian war at all. She stands beside the oranges with her shopping cart and says: “I have noticed that vegetables are getting more expensive.” Also, lately there has been less in plastic packs. “For example with onions and potatoes.” Saki Aida lives alone with her husband, so it doesn’t bother her much. “But for a large family, it’s probably difficult.”

Japan, the world’s third largest economy, has long seemed like a blissful, somewhat world-forgotten island state. He persevered, barely moved, but was not dissatisfied either. Japan benefited from record debt in its currency, a homogeneous national economy, and ultra-lax monetary policy, which the central bank pursued in close cooperation with the right-wing conservative government. And during the pandemic, Japan was more balanced than any other G-7 country due to its cleverly balanced policy of closed borders and a belief in adherence to domestic collective society. So prices in the country were still reasonably stable even when the coronavirus was already driving inflation in the United States and Europe.

Inflation: China Town in Yokohama: Japan has so far recovered well from the crisis.

China Town in Yokohama: Japan has so far recovered well from the crisis.

(Photo: Koji Sahara/ Associated Press)

But since Russia invaded Ukraine, Japan has had to worry about its financial balance. Inflation in April rose to 2.1 per cent from 0.5 per cent in January. Energy and food prices are rising. Farmers in Japan are complaining as fertilizers are becoming more expensive. And the yen falls and falls. Last week it was the lowest in 24 years. Since energy is primarily an imported product for Japan, it also adds to cost pressures for the general public. Frank Roewkamp, ​​head of the East Asia Institute at Ludwigshafen University of Economics and Society, says: “Japan has a real problem.”

Everyone has a real problem. Basically, Japan is doing even better than the US and Europe, as the inflation rate here is just over two percent. However, Japan seems to be a prisoner of its own courage right now.

Among industrialized countries, the country is at the forefront of a radical low interest rate policy. The Federal Reserve in Washington and the European Central Bank in Brussels have done well to follow the example of the Bank of Japan (BOJ) in Tokyo, although they have never relaxed their monetary policies to such an extent that the Japanese consider them made easy. But in the crisis, Americans and Europeans are shying away from putting more and more money into the system. Both the central banks have announced significant hike in key interest rates to curb inflation. BOJ, on the other hand, continues as before. She can’t help it.

BOJ recognizes that high inflation is only a temporary phenomenon

Ever since then-newly-elected Prime Minister Shinzo Abe introduced his so-called Abenomics policy in 2012, Japan has been moving almost on the rhythm of a hypothetical fundraising program for the domestic economy. Since then, the central bank has consistently bought government bonds from commercial banks and other financial institutions, thereby backing loans at extremely low interest rates and indirectly keeping the state liquid. Japan’s key interest rate is currently in negative territory at -0.1 percent. This concept of printing almost any money and getting into debt worked.

There is only one catch: the share of the central bank in the national debt is very high in Japan. As of December 2021, the BOJ holds 43 percent of all Japanese government bonds. In addition to taxes, the debt accounts for about half of the Japanese national budget. This national budget, in turn, bears the cost not only for social order, education, defence, etc. But also the interest on the national debt. “Now imagine that interest rates go up in Japan, for example by one percent, like in Germany,” Rovekamp says, “then this interest item explodes on the expense side.”

The finance ministry in Tokyo published an extrapolation on this in January: according to it, if interest rates on government bonds rise to 1.3 percent, interest rates on interest rates in fiscal year 2025 will cost taxpayers 28.8 trillion yen, instead of 24.3 trillion yen this year. Yen will be In the coming years, the increase will be even more severe if more and more cheap old government bonds are phased out and have to be replaced with new, more expensive ones.

The BoJ cannot allow this. At the same time, the dollar is getting expensive. The yen is depreciating. “It is important to keep an eye on developments in the financial and foreign foreign exchange markets and their impact on Japan’s economic activity and prices,” the BOJ’s latest monetary policy position paper said. But she actually believes that high inflation is only a temporary phenomenon.

Inflation: Businessmen in Tokyo: In Japan's collectivist society, people are used to reducing claims.

Businessmen in Tokyo: In Japan’s collectivist society, people have a habit of minimizing claims.

(Photo: Yuichi Yamazaki/Getty Images)

specific central bank. Optimism is part of their business. Economists Rovekamp and others are skeptical. The war continues, the energy and food crisis has only just begun. And Japan isn’t exactly launching into the post-pandemic future at any pace. For example, the government of Prime Minister Fumio Kishida has been reluctant to open borders to foreign tourism, a booming industry before Corona. And the “new capitalism” that Kishida announced ahead of his election in October 2021 initially seems like an old-fashioned concept for a bit more economic regulation and redistribution.

Still, Frank Rovekamp is somewhat more optimistic about Japan than Europe. Because in Japan’s collectivist society, people are used to reducing demands and accepting difficulties. For example, seniors already in their 70s are helping curb social spending by working. “The Japanese are in trouble, but they will deal with these difficulties without any major upheaval,” says Rovekamp. “They’ll just tighten their belts.”

That’s exactly what Saki Aida would do in Nishitokyo. Due to her husband’s health, she no longer has a car, so she doesn’t care about gas prices. But electricity is getting expensive. Saki thinks Aida. Saving on air conditioning is difficult because of the sultry summer. They can’t save on travel because they haven’t left long enough anyway. “Maybe I can save on clothes,” says Saki Aida, somewhat at a loss. Many people are likely to have a problem with Japan’s inflation: they could hardly be more frugal.

Nation World News Desk
Nation World News Desk
Nation World News is the fastest emerging news website covering all the latest news, world’s top stories, science news entertainment sports cricket’s latest discoveries, new technology gadgets, politics news, and more.
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