Kiuchi’s relatively sanguine tone on current pass-through contrasts with the BOJ’s more cautious warning last week about inflation overshoot risk, a gap that could leave markets parsing whether the government sees less urgency for policy tightening than the central bank does. His explicit hope that the BOJ conducts policy appropriately to sustainably hit its 2% target, paired with a call for close communication between the two, is a standard formulation but still worth watching for any shift in tone that might signal government discomfort with the pace of BOJ action. His refusal to comment on a specific FX level, while still flagging close monitoring of currency impact on prices, keeps the door open to future verbal intervention if yen weakness accelerates, particularly given the currency’s recent vulnerability to Japan’s fiscal position.
Japan’s economy minister says cost pass-through to consumer prices remains limited for now, but warned food prices could see gradual increases from summer through autumn.
Summary:
- Economy Minister Minoru Kiuchi said the pass-through of rising costs from the Middle East conflict onto consumer goods prices has been limited so far.
- He noted Japan’s overall June CPI rose 1.7% year-on-year, which he characterised as showing only moderate price rises.
- Kiuchi said the government must remain vigilant to the possibility that cost pass-through to food and other consumer goods could proceed gradually from summer through autumn.
- He said the government shares the Bank of Japan’s forecast that consumer inflation will accelerate in the latter half of this year before slowing thereafter.
- Kiuchi said he hopes the BOJ conducts monetary policy appropriately to stably and sustainably achieve its 2% inflation target, and hopes the central bank communicates closely with the government in guiding policy.
- He declined to comment on a specific FX level but said he is watching closely the impact of currency moves on the economy and prices.
Japan’s Economy Minister Minoru Kiuchi offered a relatively sanguine assessment of inflationary pressures on Tuesday, saying the pass-through of rising costs stemming from the Middle East conflict onto consumer goods prices has remained limited so far, even as he flagged risks further ahead.
Speaking at a news conference, Kiuchi was asked about the Bank of Japan’s warning last week regarding rising risks of an inflation overshoot. In response, he pointed to Japan’s overall consumer price index, which rose 1.7% year-on-year in June, describing the increase as showing only moderate price rises. That comment suggested the minister sees current inflation dynamics as broadly under control, at least for now.
Kiuchi was more cautious, however, about the months ahead. He said the government needs to remain vigilant to the possibility that rising costs could be gradually passed onto food and other consumer goods from summer through autumn, acknowledging that the current calm in pass-through effects may not persist. That view aligned with a broader forecast he said the government shares with the Bank of Japan, namely that consumer inflation is expected to accelerate in the latter half of this year before slowing again thereafter.
On monetary policy, Kiuchi expressed hope that the Bank of Japan conducts policy appropriately in order to achieve its 2% inflation target in a stable and sustainable manner. He also said he hopes the central bank maintains close communication with the government as it guides policy, a comment that reflects the ongoing coordination between fiscal and monetary authorities as Japan navigates its current inflation trajectory.
On the currency, Kiuchi declined to comment on any specific level for the yen, but said he is watching closely how foreign exchange moves are affecting both the broader economy and price levels. That stance leaves room for further government commentary on the currency should volatility increase, particularly at a time when Japan’s fiscal position, including a recently advanced plan to cut the food consumption tax, has already been cited as a source of pressure on the yen. Kiuchi’s remarks, taken together, suggest a government that sees near-term inflation risks as manageable but is bracing for a more challenging pass-through environment as the year progresses.
This article was written by Eamonn Sheridan at investinglive.com.