Japan's economy picks up, expected to be under downward pressure

22 Sep '22

2 min read

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Despite being hit by factors like a rise in commodity prices, Japan's economy has picked up with accelerated resumption of economic activity and the public protected from COVID-19, according to the Bank of Japan. The economy is likely to recover, with the impact of COVID-19 and supply-side constraints waning, the bank said in a monetary policy statement issued today.

The economy, however, is expected to be under downward pressure stemming from a rise in commodity prices due to factors like the situation surrounding Ukraine, it noted.

Thereafter, as a virtuous cycle from income to spending intensifies gradually, Japan's economy is projected to continue growing at a pace above its potential growth rate.

The year-on-year rate of change in the consumer price index (CPI of all items except fresh food) is likely to increase toward the end of this year due to rise in prices of items such as energy, food and durable goods.

Thereafter, the rate of increase is expected to decelerate because the contribution of such price rises to the CPI is likely to wane, it noted.

Meanwhile, the underlying inflationary pressure is projected to increase on the back of improvement in the output gap and rises in medium- to long-term inflation expectations and in wage growth.

The bank will support financing, mainly of firms, and maintain stability in financial markets, and will not hesitate to take additional easing measures if necessary, it said. It also expects short- and long-term policy interest rates to remain at their present or lower levels.

Fibre2Fashion News Desk (DS)

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