Japan’s inflation above target for over 3 years, but where is BOJ?

The major central banks have raised their policy rates in the face of increased inflation since the Covid-19-but the Bank of Japan was strange.

I remained though The main address and the basic inflation Running over its 2 % target since April 2022, and despite the highest two -year -old inflation in January. The so -called “main nucleus” inflation has been operated over the target since October 2022.

BOJ has raised interest rates by only 60 basis points in 14 months since March 2024, when that is Abandoning her negative interest rate policy. She kept her policy price of 0.5 % in her last meeting in June, saying that “the primary consumer price index is likely to be slow, mainly due to the slowdown in the economy.”

US Federal Reserve raised interest rates for the first time since 2018 in March 2022And every main central bank except BOJ raised prices of that year.

In Japan, the main engine of inflation is food prices, Specifically rice prices.

Rice prices in the country increased sharply in the second half of 2024 and accelerated in the first half of 2025, mainly due to poor harvest in 2023 and 2024.

in May, Rice prices are more than weak, 101.7 % increase. This represents the largest increase in more than half a century.

Marcela Zhao, a global market strategy at JP Morgan Management, noticed that Rice represents about half of the basic inflation in Japan, and future inflation trends depends largely on food prices, especially rice.

“When we look at modern data, consumers’ enlargement moves about 3 %. But this is mostly due to the high costs of import and rice prices … we expect these pressures to be dissipated,” he said. Comments translated by Reuters.

Zhao of JPM indicated that UEDA also indicated that the basic inflation, which is a greater focus on BOJ, remains less than 2 %. Boj publicly does not publicly reveal the ingredients that determine “latent inflation”.

“This indicates that the central bank is the last rise in rice prices temporarily,” she said.

Yologo Goto, head of the Foreign Drainage Strategy for Japan in Nomura, told CNBC that the current high inflation, especially in food enlargement, is often due to problems in supply, not strong demand.

“Thus, the Boujer Bank is interested in the bank that does not need to respond to the increase in inflation, which is just cost enlargement. Against cost -to -cost, high interest rates may not be very effective in slowing inflation,” said Goto.

This offer is supported by Kei Okamura, a wallet manager at Neubleger Berman, who said about “”Squawk box asia“Prices of food pressures are likely to fade in the next few months.

Japan is currently locked in trade negotiations with the United States without any clear sign of an agreement. On June 20, the best trade negotiator in the country According to what was reported, Riosi Akazawa said Those commercial negotiations with the United States “remained in fog.”

If the two sides do not reach a deal, a “mutual” tariff will be slaughtered by 25 %

It can enhance the raising rates of yen, making Japanese exports less competitive and restricting growth at a time when the economy is facing the export of the opposite wind.

Country The latest trade data It revealed that Japan’s exports in May decreased by 1.7 % on an annual basis, which represents a sharp decline since September 2024.

Japan’s gross domestic product He refused for the first time a yearIt decreased by 0.2 % in the quarter in the quarter in the three months ending in March, when exports decreased sharply.

Since April 2022, Japanese yen It was placed from about 120 yen against the dollar to its current levels around 150. In 2024, the currency was placed to 161.99 on July 3, representing its weakest level against the dollar in about 38 years.

Neumane said, “The period of transgression of inflation may be necessary to shake Japanese families and companies from the expectations of limited prices over time.”

He said that although the BOJ’s “Go-IT-Slaow” approach has what justifies it, Japanese cash officials need to be cautious against the normalization of politics after it is too late.

“Boj faces a narrow and narrow path forward, and it needs to be rapidly lifting enough to prevent inflation expectations from photography, but not very quickly so that he sees the economy returning to its previous quagmire.”