In Japan, inflation as measured by the core CPI is expected to exceed +2% YoY in April 2022 and is expected to remain above 2% throughout 2022.
In 2014, when the CPI last exceeded 2%, price increases were not sustainable due to weak consumption. This time, a combination of timely response from the government, accumulated savings post-pandemic and normalizing of economic activity are expected to support consumption.
We believe that there have been transformations in the pricing behaviour of companies, such as dynamic pricing in response to demand and raising prices of higher added value products.
This round of price hikes, which has been triggered by a surge in the price of imported raw materials could be the first opportunity since 2014 for a change in Japan's price outlook, boosted by the efforts to retain employees on the labour shortage and the Kishida Government's distribution policy.
Read the full report here:
Written by Yuko Iizuka, Economist, Asset Management One Co., Ltd.