In November, Japan’s core consumer price inflation increased to 3.7%, the highest level since 1981.
At that time, a conflict in the Middle East hampered the oil supply and drove up energy costs.
However, following decades of attempts to increase inflation, Japanese consumers are suddenly feeling the pain of rising costs despite stagnating earnings.
The Bank of Japan (BOJ) has maintained its ultra-loose monetary policy to stimulate its economy until now.
This week, however, it stunned the market by increasing the interest rate cap on its 10-year government bonds from 0.25 percent to 0.5 percent.
As a result, the exchange rate between the Japanese yen and the US dollar has reached 151 yen per dollar for the first time since 1990.
The weak currency has contributed to the country’s inflation by accelerating the rise in import prices caused by the war in Ukraine.
Japan has one of the lowest inflation rates in the world and has reversed the trend of other G7 nations, which have gradually increased their interest rates to combat rising prices.
The yearly inflation rate in the United States is 7.1%, whereas it is 11.1% in the European Union and 10.0% in the United Kingdom.
