Japan Households Anticipate a Rise in Inflation

Japan view at night

In September, the ratio of Japanese households that estimated prices to rise a year from now was at 68.2%. Three months ago, it was just at 66.8%, a quarterly central bank survey showed.

The survey showed that the median projection of inflation a year from now was at 3.0% in September, up from 2.0% in June. The ratio of households estimating prices to rise five years from now dropped to 78.1% in September from 79.3% in June.

The survey showed that more households expect economic conditions to worsen a year from now. This highlights concerns that the pandemic could continue to weigh on consumption.

Households say they have seen prices rise from year-before levels, up from 56.4% in June. These effects of rising food and grocery costs were felt by 61.5% of 2,209 households surveyed between Aug. 6 and Sept. 1.

A strong external demand leads to a gradual recovery of the world’s third-largest economy. Though, state of emergency curbs amid the pandemic hobbled the country’s consumption. The restrictions, however, were lifted on Sept. 30. 

In contrast with other major economies where prices spike on strong demand and supply bottlenecks, soft household spending in Japan has kept consumer inflation around zero.

In 2013, former Prime Minister Shinzo Abe deployed his “Abenomics” stimulus policies to pull the country out of almost two decades of grinding deflation. Since then, consumer prices have climbed, and inflation remains distant from the Bank of Japan’s 2% target. That was due in part to weak household spending.

 

Kishida to Prioritize Tax Reforms that Aim to Raise Wages

 

On Monday, Japanese Prime Minister Fumio Kishida said the government would prioritize tax reforms to encourage companies to raise wages to redistribute more wealth to households.

On the idea of raising Japan’s capital gains tax, Kishida said it’s among options to create a virtuous cycle (in the economy). But there are other things they should do. First, he said, such as reforming the tax system to achieve wage hikes. The government will consider offering tax incentives to companies that boost wages, he added. 

Meanwhile, Kishida’s parliamentary questioning on Monday is the first chance for the opposition to probe Kishida’s promises and plans since he took office last week. The general election should to take place in three weeks’ time.

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