Japan's Economy Minister Offers Contrasting View on Inflation Risks

Japan's economy minister, Minoru Kiuchi, expressed a relatively optimistic view on inflationary risks during a news conference. He stated that consumer prices have only seen moderate rises so far and that the pass-through of higher costs from the Middle East conflict remains limited.

The assessment offered by Minister Kiuchi contrasts with the Bank of Japan's (BOJ) most recent warning about the risks of inflation overshooting its 2% target. The BOJ had raised interest rates to a 31-year high of 1% in June and has continued to guide policy towards achieving this target.

Kiuchi noted that while average real wages are expected to increase nearly 1% during the current fiscal year ending in March 2027, the government is focused on cushioning households from rising inflation through fuel subsidies. He emphasized the need for vigilance and the importance of adapting policy if necessary to mitigate extreme volatility.