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Inflation in 2022 exceeds 2%, Towns and wards, for the first time in 30 years except at the time of the tax increase

THE NIKKEI via scoutAsia

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January 11, 2023 2 min read
Inflation in 2022 exceeds 2%, Towns and wards, for the first time in 30 years except at the time of the tax increase

The inflation rate for the Tokyo metropolitan area in 2022 is 2.2%. This is the first time in 30 years since 1992, excluding the time of the sales tax increase, that the full-year rate has exceeded 2%. Inflation accelerated through the second half of the year, reaching 4.0% in December, the highest level in 40 years and 8 months. The high prices of resources and the weak yen have led to widespread price hikes, especially for daily necessities such as energy and food, and this has intensified the disadvantageous situation for households, as real consumption has fallen.

The government and the Bank of Japan have set a price stability target of 2% for the rate of increase. Based on the figures for metropolitan areas, which are considered leading indicators, the national inflation rate announced on 20th may also exceed 2%, further increasing the pressure for a monetary easing correction.

The consumer price index for metropolitan areas in 2022 (2020=100) announced by the Ministry of Internal Affairs and Communications on 10th was 101.9, up 2.2% from the previous year for the total, excluding fresh food, which fluctuates widely. The growth was the largest since 1992 (2.4%), in line with 2014 (2.2%) when there was an increase in sales tax. The total including fresh food was 2.5%, and the total excluding fresh food and energy was 1.0%.

Energy, including electricity and city gas bills, rose 23.9%. The yen’s depreciation amplified the high resource prices spurred by the Ukraine crisis. Food went up 4.5%.

Inflation accelerated through the second half of the year. In December, the rate of increase excluding fresh groceries rose to 4.0% from the same month last year. It has been 40 years and 8 months since April 1982 (4.2%) since the 4% mark was reached. Energy and food rose 26.0% and 7.0%, respectively. This alone boosted the total by 3 points.

The base of inflation is also expanding. The increase was 22.1% for smartphones and other handheld devices, a further increase from November (20.1%). Cab fares increased by 14.4%, indicating that the wave of higher prices has also reached public utilities, which had previously seen little price fluctuation.

Currently, wage increases are not keeping pace with inflation, and households’ purchasing power is declining. The November household survey released by the Ministry of Internal Affairs and Communications (MIC) on 10th showed that real consumption expenditures, excluding the effects of price fluctuations, fell below the level of the same month last year for the first time in six months.

Food, which accounts for 30% of expenditures, fell 2.9%, the second consecutive month of negative growth. Alcoholic beverages, which saw a price increase in October, decreased 8.2%. Conservative purchases were seen for many of the items with price increases, including oils and fats (down 17.3%), bread (down 5.3%), and prepared foods (down 2.2%).

The higher temperatures this winter and the loss of upward momentum in demand for winter clothing such as coats also pushed down overall consumption. Outing-related activities were strong, with packaged travel spending growing 51.9%.

The rush to raise food and other prices will not stop in 2023. Even if the appreciation of resources and the depreciation of the yen come to a temporary halt, prices may remain high if companies continue to pass on prices, which they have lagged behind. The economic outlook will depend on whether wage increases resulting from spring wage negotiations and other factors will outpace inflation.

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The English translations provided through this service are the result of automatic and mechanical translation of contents written in Japanese and created by Nikkei or licensed by a third party, by an automatic translation system provided by a third party after certain processing of the contents by Nikkei. Nikkei disclaims all warranties, express or implied, related to the English translations, including any warranty of accuracy, reliability, validity and fitness for a particular purpose. Users shall use this service with the full understanding that it employs an automatic translation system that automatically and mechanically recognizes and analyzes information and outputs the results.