Japan Economy Faces Rising Inflation Pressure from Middle East Conflict
The Japanese government has highlighted mounting inflationary pressure on the country's economy, citing rising costs from the Middle East conflict. According to an annual white paper released by the Cabinet Office, corporate and household inflation expectations are accelerating, mirroring the Bank of Japan's view that inflationary pressures are becoming embedded in the economy.
The white paper noted that companies' spending appetite remains strong, with investment plans exceeding historical averages for two consecutive years. However, it also warned that close attention is needed to assess the extent to which the Middle East conflict could harm Japan's economy and output gap.
The conflict-induced energy shock has pushed up fuel costs at a faster pace than in 2022, when the war in Ukraine had a similar effect. The white paper is compiled by the Cabinet Office, overseen by Economy Minister Minoru Kiuchi, who is seen as cautious of the BOJ's rate-hike plans.