Why? Japan’s only economy Still in full monetary easing mode? right here Haruiko Kuroda BOJ governor gave the answer that there wasThere are 3 reasons namely
1. GDP: The size of Japan’s economy now is 2.7 percent smaller than it was in the pre-COVID period. The size of the US and European economies is already 3.7 and 0.6 percent larger than before, respectively. Therefore, the logic of thinking is similar to the Bank of Thailand, which is that we should relax monetary policy to support the economy first during this period.
2. Terms of Trade: Despite Japan’s GDP growth rate of 2.1 percent in fiscal year 2021, when considering GNI (Gross National Income), which increases other factors such as income from overseas investments and income from profit or loss from trade
Over the past one year, it has been negatively accounted for by Japan as an importer of commodities that have risen in dollar terms. Although the yen helps export goods and services There is a lower price in the destination country. However, it does not help imports in any way. Therefore, monetary policy easing must help offset higher imports.
(Photo by Aleksandar Pasaric)
3. Inflation: Although the Japanese inflation rate excluding fresh food in last April is equal to 2.1%. However, when the energy price factor is taken away from inflation It appears that the inflation rate in April will be 0.8 percent.
While the Japanese authorities have estimated In 2022, Japan’s excluding fresh food inflation rate is 1.9 percent, but in 2023 it will be just 1.1 percent. The target inflation rate should be close to 2 percent.
When calculated on average throughout the economic cycle Consequently, the Bank of Japan should continue to ease its monetary policy, which is The BOJ is likely to stimulate through monetary policy for a while.
(BOJ)
How will the BOJ proceed to bring inflation to the point of its 2 percent target? At this point, the BOJ governor has commented that it depends on 3 main components namely
1. Inflation dynamics during the COVID-19 pandemic By comparing Japan with the United States and Europe. will find that in the case of the United States CPI inflation rate last May It jumped to 8.6 percent as neither the Federal Reserve nor the Fed accelerated its easing in monetary policy at the end of last year.
In addition, the US labor market is relatively tight, with the ratio between vacancies and applicants almost 2, resulting in tighter wages. while the inflation of Europe The main part comes from energy imports. with a much higher price Since Russia invaded Ukraine earlier this year
In terms of inflation in Japan In terms of inflation, the commodity side is not much of an issue. The main problem lies in the fact that the inflation rate of the service sector refuses to rise from zero percent. It is expected to come from demand, which is the type that when prices are only slightly raised. Demand also dropped sharply. Conversely, when the price is reduced The demand did not increase at all. As a result, keeping the price the same is the best service provider.
2. The importance of raising wages The problem of the Japanese labor market is that the reason why wages have not accelerated is that over the years Average wages are up 2% per year, while average inflation is much lower than wages. causing even higher inflation during this year
Japanese workers also do not feel that the cost is rising. This is because the wage increases for many years have offset the price increase even this year. The laborer was not greatly affected. Therefore, there is no incentive to claim additional wages. As a result, the cycle of wage increases following higher inflation this year has not been cyclical at all.
3. Signs of change in inflation expectations At this point, it’s good news for Japan’s expected inflation rate. When it was found that the business sector’s outlook on prices over the next 1, 3 and 5 years was higher in decades. while consumers haveThe higher the level of sensitivity to prices decreases. That is, fewer customers will switch supermarkets when their regular purchases are up 10 percent, meaning Japan’s expected inflation has moved to its highest level in decades.
And that’s it. There are good signs for a change in inflation expectations. that came out significantly higher.
column macro perspective
Dr. Buntham Rachitpinyolert
Advisor to Chief Executive Officer
We Asset Management Company Limited (WeAsset)
