In today’s episode, activist Sonam Wangchuk ends his 26-day hunger strike after discussions with the government. Wangchuk expressed gratitude and appealed for peace, while Union Ministers JP Nadda and Jitendra Singh conveyed assurances regarding peaceful protesters and possible compensation for victims linked to recent exam paper leaks.

Meanwhile, global tensions continue as a Ukrainian drone strike targets a warehouse near St. Petersburg, causing fires and heavy smoke. Reports suggest multiple drones were involved in the attack.

 US President Donald Trump issues a warning against Yemen’s Houthi rebels following attacks on Red Sea oil tankers, while Kuwait says its air defenses intercepted Iranian missiles and drones after a reported attack near the Iraq border.

Trump also discusses upcoming talks with Chinese President Xi Jinping, including cooperation and competition in artificial intelligence technology.

In Europe, wildfires in France force thousands to evacuate as extreme heat and drought fuel dangerous flames. Japan’s inflation data also shows core inflation rising to 2.9%, influencing future economic decisions.

Watch the full episode for complete coverage of today’s biggest world stories.

NEET Protest update | Iran Missile threat | US-China AI talks | Europe Wildfires | Japan News 

Japan's wholesale inflation continued to cool in July, marking the fourth consecutive month of slowing price growth, according to government data released on August 13. The Corporate Goods Price Index (CGPI), which tracks the prices that businesses charge one another for goods and services, rose by 2.6 per cent year-on-year, down from June’s 2.9 per cent increase. While this was above market expectations of 2.5 per cent, it signals that inflationary pressures from raw material costs are gradually dissipating.Despite the overall slowdown, food and agricultural goods prices continued to climb, pointing to a broader trend of price increases beyond just raw materials. Food and beverage prices jumped 4.2 per cent in the year to July, indicating persistent price pressures in the consumer goods sector. This has raised market speculation that the Bank of Japan (BOJ) may be forced to adjust its monetary policy, potentially hiking interest rates sooner than anticipated.<h2>Cooling PPI amid tariff pressures</h2>The Producer Price Index (PPI), a key measure of domestic inflation, rose by 2.6 per cent in July, a slightly higher-than-expected figure, but remained at its slowest pace in 11 months. This marks a significant deceleration from the 2.9 per cent increase recorded in June. The month-on-month growth stood at 0.2 per cent, in line with forecasts. Analysts attribute the moderation in PPI to a combination of factors, including lower demand, a slowdown in consumer spending, and the impact of higher US trade tariffs on Japanese manufacturers.Japan’s manufacturing sector has faced increased costs from overseas tariffs, particularly the 25 per cent duty on automobile imports imposed by the US. However, a recent trade deal between Japan and the US saw a reduction in tariffs on automobiles from 25 per cent to 15 per cent, providing some relief to local producers.<h2>Bank of Japan’s rate hike dilemma</h2>While Japan's central bank has expressed confidence that inflation will stabilise and hit its 2 per cent target, some economists warn that persistent price increases in food and agriculture may force the BOJ to take more decisive action. The BOJ raised interest rates to 0.5 per cent in January, marking the first hike in over a decade, as part of a broader effort to normalise its monetary policy. Governor Kazuo Ueda has indicated that further rate hikes will depend on sustained inflationary pressure, though he has also urged caution, pointing to one-off factors like raw material costs as the primary drivers of recent inflation. The central bank’s next moves will likely be dictated by the ongoing balance between inflation trends and the economic growth outlook. With both inflation and economic growth showing signs of slowing, the BOJ faces difficult decisions in the months ahead.&nbsp;(With inputs from agencies)

Despite the overall slowdown in Japan's inflation, food and agricultural goods prices continued to climb, pointing to a broader trend of price increases beyond just raw materials. Food and beverage prices jumped 4.2 per cent in the year to July.

Japan's wholesale inflation continued to cool in July, marking the fourth consecutive month of slowing price growth, according to government data released on August 13. The Corporate Goods Price Index (CGPI), which tracks the prices that businesses charge one another for goods and services, rose by 2.6 per cent year-on-year, down from June’s 2.9 per cent increase. While this was above market expectations of 2.5 per cent, it signals that inflationary pressures from raw material costs are gradually dissipating. Despite the overall slowdown, food and agricultural goods prices continued to climb, pointing to a broader trend of price increases beyond just raw materials. Food and beverage prices jumped 4.2 per cent in the year to July, indicating persistent price pressures in the consumer goods sector. This has raised market speculation that the Bank of Japan (BOJ) may be forced to adjust its monetary policy, potentially hiking interest rates sooner than anticipated. Cooling PPI amid tariff pressures The Producer Price Index (PPI), a key measure of domestic inflation, rose by 2.6 per cent in July, a slightly higher-than-expected figure, but remained at its slowest pace in 11 months. This marks a significant deceleration from the 2.9 per cent increase recorded in June. The month-on-month growth stood at 0.2 per cent, in line with forecasts. Analysts attribute the moderation in PPI to a combination of factors, including lower demand, a slowdown in consumer spending, and the impact of higher US trade tariffs on Japanese manufacturers. Japan’s manufacturing sector has faced increased costs from overseas tariffs, particularly the 25 per cent duty on automobile imports imposed by the US. However, a recent trade deal between Japan and the US saw a reduction in tariffs on automobiles from 25 per cent to 15 per cent, providing some relief to local producers. Bank of Japan’s rate hike dilemma While Japan's central bank has expressed confidence that inflation will stabilise and hit its 2 per cent target, some economists warn that persistent price increases in food and agriculture may force the BOJ to take more decisive action. The BOJ raised interest rates to 0.5 per cent in January, marking the first hike in over a decade, as part of a broader effort to normalise its monetary policy. Governor Kazuo Ueda has indicated that further rate hikes will depend on sustained inflationary pressure, though he has also urged caution, pointing to one-off factors like raw material costs as the primary drivers of recent inflation. The central bank’s next moves will likely be dictated by the ongoing balance between inflation trends and the economic growth outlook. With both inflation and economic growth showing signs of slowing, the BOJ faces difficult decisions in the months ahead. (With inputs from agencies)

Despite the overall slowdown in Japan's inflation, food and agricultural goods prices continued to climb, pointing to a broader trend of price increases beyond just raw materials. Food and beverage prices jumped 4.2 per cent in the year to July.

Japan's wholesale inflation slows, but food prices keep rising

Japan’s core consumer inflation in its capital slowed more than expected in June, driven by government relief on utility bills, but remained firmly above the central bank’s 2 per cent target, underscoring persistent price pressures in the world’s fourth-largest economy. Data released on Friday showed the Tokyo core consumer price index (CPI), which excludes volatile fresh food costs, rose 3.1 per cent in June compared with a year earlier. That was softer than May’s 3.6 per cent gain and below the median market forecast of 3.3 per cent, as per Reuters.&nbsp;The slowdown was largely attributed to the resumption of energy subsidies and temporary cuts to water charges in the city, aimed at helping households cope with soaring summer utility demand.<h2>Price pressures remain broad-based</h2>Despite the headline cooling, underlying price pressures in Japan’s export-reliant economy remain pronounced. A separate index that strips out both fresh food and fuel, a key measure closely watched by the Bank of Japan (BOJ) as an indicator of domestic demand-driven inflation also rose 3.1 per cent in June, after a 3.3 per cent increase in May.&nbsp;Marcel Thieliant, head of Asia-Pacific at Capital Economics, noted the underlying inflation trend remains well above the BOJ’s projections. “The slowdown in headline inflation in Tokyo in June partly reflects the resumption of energy subsidies,” he said. “With underlying inflation still running well ahead of the Bank of Japan’s forecasts, we still expect the Bank to hike rates in October.”<h2>Rising food costs hit households</h2>The data highlights the widening impact of inflation on Japanese households. The cost of food, excluding volatile items like vegetables, jumped 7.2 per cent in June from a year earlier, accelerating from May’s 6.9 per cent gain. Government figures showed particularly sharp increases for everyday staples: households in Tokyo paid 89 per cent more for rice than a year ago, 48 per cent more for a bar of chocolate, and 50 per cent more for a bag of coffee beans.&nbsp;Service-sector inflation, another area closely tracked by the BOJ, remained elevated at 2.1 per cent in June after hitting 2.2 per cent in the previous month, adding to evidence that price increases are spreading beyond imported raw materials to more domestically anchored sectors.<h2>Monetary policy under scrutiny</h2>The June inflation data will be a crucial factor in the Bank of Japan’s next policy meeting on July 30–31 when its board is set to issue fresh quarterly growth and price forecasts. Japan’s central bank, which ended its decade-long ultra-loose monetary policy last year, raised short-term interest rates to 0.5 per cent in January, the first increase since the era of negative rates began. Officials argued that inflation was on the verge of sustainably reaching the 2 per cent target.&nbsp;However, the economic backdrop has grown more complicated. The BOJ was forced to downgrade its growth forecasts in May, partly due to the impact of steep US tariffs that have threatened to hurt Japan’s export sector. While the BOJ has signalled readiness to continue raising rates if inflation risks intensify, the path ahead remains uncertain. Consumer inflation has exceeded the 2 per cent target for more than three years, as companies continue to pass on elevated raw material costs.Some central bank policymakers are already sounding a more hawkish note. Board member Naoki Tamura warned this week that the BOJ might need to act “decisively” if upside inflation risks strengthen. a sign that the pressure to normalise monetary policy further is unlikely to go away soon.&nbsp;&nbsp;For now, markets are watching carefully for signals from the central bank’s leadership, as Japan navigates the challenge of controlling inflation without stalling its still-fragile post-pandemic recovery.&nbsp;(With inputs from the agencies)&nbsp;

The Bank of Japan faces scrutiny ahead of its policy meeting, with potential interest rate hikes anticipated if inflation risks intensify. Economic complexities challenge efforts to manage inflation while supporting recovery.

Japan’s core consumer inflation in its capital slowed more than expected in June, driven by government relief on utility bills, but remained firmly above the central bank’s 2 per cent target, underscoring persistent price pressures in the world’s fourth-largest economy. Data released on Friday showed the Tokyo core consumer price index (CPI), which excludes volatile fresh food costs, rose 3.1 per cent in June compared with a year earlier. That was softer than May’s 3.6 per cent gain and below the median market forecast of 3.3 per cent, as per Reuters. The slowdown was largely attributed to the resumption of energy subsidies and temporary cuts to water charges in the city, aimed at helping households cope with soaring summer utility demand. Price pressures remain broad-based Despite the headline cooling, underlying price pressures in Japan’s export-reliant economy remain pronounced. A separate index that strips out both fresh food and fuel, a key measure closely watched by the Bank of Japan (BOJ) as an indicator of domestic demand-driven inflation also rose 3.1 per cent in June, after a 3.3 per cent increase in May. Marcel Thieliant, head of Asia-Pacific at Capital Economics, noted the underlying inflation trend remains well above the BOJ’s projections. “The slowdown in headline inflation in Tokyo in June partly reflects the resumption of energy subsidies,” he said. “With underlying inflation still running well ahead of the Bank of Japan’s forecasts, we still expect the Bank to hike rates in October.” Rising food costs hit households The data highlights the widening impact of inflation on Japanese households. The cost of food, excluding volatile items like vegetables, jumped 7.2 per cent in June from a year earlier, accelerating from May’s 6.9 per cent gain. Government figures showed particularly sharp increases for everyday staples: households in Tokyo paid 89 per cent more for rice than a year ago, 48 per cent more for a bar of chocolate, and 50 per cent more for a bag of coffee beans. Service-sector inflation, another area closely tracked by the BOJ, remained elevated at 2.1 per cent in June after hitting 2.2 per cent in the previous month, adding to evidence that price increases are spreading beyond imported raw materials to more domestically anchored sectors. Monetary policy under scrutiny The June inflation data will be a crucial factor in the Bank of Japan’s next policy meeting on July 30–31 when its board is set to issue fresh quarterly growth and price forecasts. Japan’s central bank, which ended its decade-long ultra-loose monetary policy last year, raised short-term interest rates to 0.5 per cent in January, the first increase since the era of negative rates began. Officials argued that inflation was on the verge of sustainably reaching the 2 per cent target. However, the economic backdrop has grown more complicated. The BOJ was forced to downgrade its growth forecasts in May, partly due to the impact of steep US tariffs that have threatened to hurt Japan’s export sector. While the BOJ has signalled readiness to continue raising rates if inflation risks intensify, the path ahead remains uncertain. Consumer inflation has exceeded the 2 per cent target for more than three years, as companies continue to pass on elevated raw material costs. Some central bank policymakers are already sounding a more hawkish note. Board member Naoki Tamura warned this week that the BOJ might need to act “decisively” if upside inflation risks strengthen. a sign that the pressure to normalise monetary policy further is unlikely to go away soon. For now, markets are watching carefully for signals from the central bank’s leadership, as Japan navigates the challenge of controlling inflation without stalling its still-fragile post-pandemic recovery. (With inputs from the agencies)

Japan's core consumer inflation in Tokyo slowed to 3.1% in June, down from May's 3.6%, influenced by government utility bill relief. This figure remains above the central bank's 2% target, reflecting ongoing price pressures.

Japan’s core inflation slows in Tokyo but stays above BOJ’s 2% target

Japan’s consumer prices have surged to the fastest pace in two years, placing economic pressure firmly at the centre of the country’s upcoming upper house election.&nbsp;&nbsp;The rise in costs, led by a sharp increase in food prices, especially rice is expected to shape both political and monetary decisions in the weeks ahead.&nbsp;As per Japan’s Ministry of Internal Affairs, core consumer prices (excluding fresh food) rose 3.7 per cent in May from a year earlier. This marks the third consecutive monthly acceleration and the fastest pace since January 2023, exceeding the 3.6 per cent median forecast of economists surveyed by Bloomberg.<h2>Japan’s inflation trend</h2>The latest inflation figure is in line with a broader upward trend in prices observed over the past year. Government data shows that core CPI had eased temporarily in 2023, but began rising again in late 2024 due to cost pressures from food, energy, and imports. The current 3.7 per cent figure is the highest since January 2023, as visualised in the chart below.&nbsp;

<figure class="table"><table><tbody><tr><td>Month-Year</td><td>CPI YoY (%)</td></tr><tr><td>Sep 2022</td><td>~1.8</td></tr><tr><td>Dec 2022</td><td>~3.9</td></tr><tr><td>Jan 2023</td><td>4.0</td></tr><tr><td>Mar 2023</td><td>~3.4</td></tr><tr><td>Jun 2023</td><td>~3.2</td></tr><tr><td>Sep 2023</td><td>~2.9</td></tr><tr><td>Dec 2023</td><td>~2.4</td></tr><tr><td>Mar 2024</td><td>~2.6</td></tr><tr><td>Jun 2024</td><td>~2.9</td></tr><tr><td>Sep 2024</td><td>~2.6</td></tr><tr><td>Dec 2024</td><td>~3.1</td></tr><tr><td>Mar 2025</td><td>~3.5</td></tr><tr><td>May 2025</td><td>3.7</td></tr></tbody></table></figure>&nbsp;Source: Japan’s Ministry of Internal Affairs

The steady rise from late 2024 indicates that underlying inflationary pressure is gaining traction, supported by food and energy costs, and amplified by the pass-through of higher import prices to consumers.<h2>Food prices in focus</h2>The biggest contributor to inflation remains food, particularly rice, Japan’s staple food and a politically sensitive commodity. According to the government data, rice prices jumped 102 per cent year-on-year, amid ongoing supply disruptions and concerns about stockpiling.&nbsp;The food crisis has added urgency to government responses. Prime Minister Shigeru Ishiba’s administration, facing re-election in July, has already announced cash handouts to offset the impact of rising living costs. Meanwhile, opposition parties are calling for Japan’s first-ever cut to the national sales tax.&nbsp;As quoted by Bloomberg, Taro Saito, head of economic research at NLI Research Institute, said, “Japan’s inflation is strong, driven by food costs — rice prices are surging and it’s impacting other related items… Today’s data will leave little doubt that inflation will be the key agenda for next month’s election.”<h2>Political tension escalates</h2>The sharp price increases come just weeks before a scheduled upper house election on July 20, which could prove pivotal for Ishiba’s minority government.&nbsp;Rising living costs have already led to political setbacks. Last autumn, the ruling party faced its biggest electoral defeat since 2009. Recent polling by local Japanese media suggests Ishiba’s popularity is recovering, helped in part by recent government subsidies to stabilise grain prices.<h2>BOJ caught between growth and inflation</h2>The inflation data has also added weight to speculation that the Bank of Japan (BOJ) may soon raise interest rates. While the central bank held rates steady at 0.5 per cent earlier this week, the inflation figure has reinforced expectations of a shift.&nbsp;As quoted by Bloomberg Economics, “The hotter CPI print will probably strengthen the BOJ’s confidence that its 2% target is becoming secure… We expect the BOJ to raise its policy rate by 25 basis points to 0.75% at its July meeting.”&nbsp;However, BOJ Governor Kazuo Ueda has remained cautious. Speaking after the central bank’s decision to keep policy unchanged, Ueda said the BOJ would monitor the impact of oil prices and US trade policy before committing to another hike.&nbsp;Despite Japan’s core inflation remaining above the BOJ’s 2 per cent target for over three years, the central bank maintains that the underlying price trend is still below its sustainability threshold.<h2>Oil prices and US Tariff add more pressure&nbsp;&nbsp;</h2>Additional inflationary pressures may be emerging from abroad. A recent rise in global oil prices, triggered by tensions in the Middle East, could push Japanese input costs higher.&nbsp;Japan is particularly vulnerable to energy shocks due to its high dependence on imports. According to Bloomberg, major Japanese firms like Lotte and Meiji have already announced fresh rounds of price increases in June, three times higher than in the same period last year, citing rising costs.&nbsp;At the same time, Japan is also assessing the economic impact of new US tariff measures, a key factor BOJ officials say could influence their decision on when and how to normalise monetary policy.<h2>What next?</h2>While the May inflation print strengthens the case for a rate hike in July, analysts say much will depend on incoming data. Teikoku Databank reports that further food price hikes are expected in June.&nbsp;Meanwhile, economists quoted by Bloomberg expect core CPI to fall below 3 per cent by late summer, due to technical adjustments and recent government subsidies. (With inputs from the agencies) &nbsp;

This inflation spike is pivotal ahead of the upper house election on July 20, putting pressure on Prime Minister Shigeru Ishiba administration and prompting government cash handouts to mitigate rising living costs. 

Japan’s consumer prices have surged to the fastest pace in two years, placing economic pressure firmly at the centre of the country’s upcoming upper house election. The rise in costs, led by a sharp increase in food prices, especially rice is expected to shape both political and monetary decisions in the weeks ahead. As per Japan’s Ministry of Internal Affairs, core consumer prices (excluding fresh food) rose 3.7 per cent in May from a year earlier. This marks the third consecutive monthly acceleration and the fastest pace since January 2023, exceeding the 3.6 per cent median forecast of economists surveyed by Bloomberg. Japan’s inflation trend The latest inflation figure is in line with a broader upward trend in prices observed over the past year. Government data shows that core CPI had eased temporarily in 2023, but began rising again in late 2024 due to cost pressures from food, energy, and imports. The current 3.7 per cent figure is the highest since January 2023, as visualised in the chart below.

Japan's consumer prices have risen sharply, with a 3.7% increase in May, the fastest since January 2023, largely driven by food prices, particularly rice, which surged 102% year-on-year.

Japan’s inflation hits two-year high ahead of key election

For the first time in more than three decades, Japan has lost its position as the world’s largest creditor nation. This resonates as a symbolic shift that reflects deeper vulnerabilities in the country’s economic foundations.&nbsp;&nbsp;According to data released by Japan’s Ministry of Finance, the nation’s net external assets reached ¥533.05 trillion ($3.7 trillion) at the end of 2024, an all-time high, yet not enough to maintain its top ranking.&nbsp;Germany has now overtaken Japan, recording net external assets of ¥569.7 trillion, buoyed by its sizeable current account surplus of €248.7 billion last year, according to Bloomberg. China retained third place with net assets of ¥516.3 trillion, according to Bloomberg. &nbsp;This development marks the end of a 34-year reign for Japan, whose overseas assets have long reflected its post-war export dominance and global investment clout. The fall, though, is not due to a sudden decline in foreign investments, in fact, Japan’s assets grew by about 13 per cent year-on-year.&nbsp;&nbsp;Rather, a combination of yen depreciation and the relatively faster accumulation of wealth abroad by competitors like Germany have tilted the balance.&nbsp;A weaker yen, while enhancing the value of overseas holdings in local currency terms, also inflated Japan’s liabilities. The Ministry of Finance noted that Japanese businesses continued to invest robustly abroad, particularly in the US and UK, with sectors such as finance, insurance, and retail attracting considerable capital. &nbsp;Yet this outward investment boom is doing little to shield the domestic economy from escalating global pressures.<h2>Japan’s fragile position in a new global order</h2>The loss of creditor status is just one sign of Japan’s broader economic fragility. Despite high overseas asset growth, the domestic economy is grappling with multiple challenges: declining consumer confidence, ageing demographics, and trade frictions that are dampening industrial momentum. &nbsp;According to the International Monetary Fund (IMF), Japan’s economy grew by just 1 per cent in 2024. The IMF projects Japan’s growth to slow further in 2025, with real GDP expected to expand only 0.9 per cent, a stark contrast to its regional peers. Inflation, meanwhile, has remained persistently above the Bank of Japan’s target, averaging around 3.1 per cent in 2024, driven largely by energy prices and a weaker yen, as reported by Reuters.&nbsp;This stagnation is compounded by global trade shifts. The return of Donald Trump to the US presidency has reignited protectionist policies, with renewed tariffs rattling key Japanese sectors. According to Reuters, Japanese automakers are already reeling from a 25 per cent US tariff on finished cars and car parts.&nbsp;&nbsp;Toyota, the country’s largest company, has projected a $1.3 billion hit to its profits for April and May alone. Nissan is reportedly considering closing two domestic plants and shifting more production to the US to bypass rising trade barriers.&nbsp;These developments have triggered warnings from Japanese economists and officials. The automotive industry, a cornerstone of Japan’s GDP and employment is caught in a tightening vice of tariff shocks and supply chain disruptions. Public dissatisfaction is also rising, with wage growth lagging behind inflation, squeezing household budgets.&nbsp;While Japan’s economy struggles, others are rising, most notably India. According to ANI, NITI Aayog CEO BVR Subrahmanyam confirmed that India has overtaken Japan to become the world’s fourth-largest economy, citing the latest International Monetary Fund data. &nbsp;The IMF’s April 2025 World Economic Outlook estimates India’s nominal GDP will reach $4.187 trillion, slightly surpassing Japan’s projected $4.186 trillion. This shift underscores Japan’s declining share in the global economy and highlights a regional power rebalancing in Asia.<h2>Tokyo’s ¥980 billion shield to counter Trump’s tariffs</h2>According to the New York Times, in a bid to cushion the domestic blow from rising tariffs and inflation, the Japanese government has unveiled a ¥980 billion ($6.3 billion) emergency spending package. The funds reportedly aim to subsidise energy costs for households and provide support to small and medium-sized enterprises (SMEs) struggling under new trade constraints. &nbsp;Cabinet Secretary Yoshimasa Hayashi announced the package earlier this week, saying it was designed to “fully support” the population during a volatile economic phase. As per Reuters, the measures are also politically timed — the Kishida administration faces an upper house election in July, and public frustration is growing over stagnant wages and higher consumer prices. &nbsp;Meanwhile, Japan’s efforts to negotiate tariff relief from the US have hit a wall. Tokyo’s top trade envoy, Ryosei Akazawa, met Trump administration officials in Washington last week, but talks reportedly stalled.&nbsp;&nbsp;Trump officials have signalled that Japan’s primary demand an exemption from auto tariffs is currently off the table. Hopes now rest on the upcoming G7 Summit in Canada, where informal discussions may resume.&nbsp;Japan’s decline in economic influence symbolised by the loss of its top creditor status and its fall behind India in GDP rankings reflects more than just statistical shifts. It signals an urgent need for economic renewal in a nation facing demographic decline, external trade pressure, and internal stagnation.&nbsp;The government’s recent fiscal package offers short-term relief, but structural reforms are needed to chart a more sustainable path forward. Analysts point to innovation, productivity gains, and trade diversification as key to Japan’s future competitiveness.&nbsp;As global economic power continues to shift and trade alliances reshape, Japan must adapt or risk fading further from the world’s economic centre stage.

Business & Economy: Germany has now overtaken Japan, with net external assets of ¥569.7 trillion, supported by its €248.7 billion current account surplus. China retained third place with net assets of ¥516.3 trillion.

For the first time in more than three decades, Japan has lost its position as the world’s largest creditor nation. This resonates as a symbolic shift that reflects deeper vulnerabilities in the country’s economic foundations. According to data released by Japan’s Ministry of Finance, the nation’s net external assets reached ¥533.05 trillion ($3.7 trillion) at the end of 2024, an all-time high, yet not enough to maintain its top ranking. Germany has now overtaken Japan, recording net external assets of ¥569.7 trillion, buoyed by its sizeable current account surplus of €248.7 billion last year, according to Bloomberg. China retained third place with net assets of ¥516.3 trillion, according to Bloomberg. This development marks the end of a 34-year reign for Japan, whose overseas assets have long reflected its post-war export dominance and global investment clout. The fall, though, is not due to a sudden decline in foreign investments, in fact, Japan’s assets grew by about 13 per cent year-on-year. Rather, a combination of yen depreciation and the relatively faster accumulation of wealth abroad by competitors like Germany have tilted the balance. A weaker yen, while enhancing the value of overseas holdings in local currency terms, also inflated Japan’s liabilities. The Ministry of Finance noted that Japanese businesses continued to invest robustly abroad, particularly in the US and UK, with sectors such as finance, insurance, and retail attracting considerable capital. Yet this outward investment boom is doing little to shield the domestic economy from escalating global pressures. Japan’s fragile position in a new global order The loss of creditor status is just one sign of Japan’s broader economic fragility. Despite high overseas asset growth, the domestic economy is grappling with multiple challenges: declining consumer confidence, ageing demographics, and trade frictions that are dampening industrial momentum. According to the International Monetary Fund (IMF), Japan’s economy grew by just 1 per cent in 2024. The IMF projects Japan’s growth to slow further in 2025, with real GDP expected to expand only 0.9 per cent, a stark contrast to its regional peers. Inflation, meanwhile, has remained persistently above the Bank of Japan’s target, averaging around 3.1 per cent in 2024, driven largely by energy prices and a weaker yen, as reported by Reuters. This stagnation is compounded by global trade shifts. The return of Donald Trump to the US presidency has reignited protectionist policies, with renewed tariffs rattling key Japanese sectors. According to Reuters, Japanese automakers are already reeling from a 25 per cent US tariff on finished cars and car parts. Toyota, the country’s largest company, has projected a $1.3 billion hit to its profits for April and May alone. Nissan is reportedly considering closing two domestic plants and shifting more production to the US to bypass rising trade barriers. These developments have triggered warnings from Japanese economists and officials. The automotive industry, a cornerstone of Japan’s GDP and employment is caught in a tightening vice of tariff shocks and supply chain disruptions. Public dissatisfaction is also rising, with wage growth lagging behind inflation, squeezing household budgets. While Japan’s economy struggles, others are rising, most notably India. According to ANI, NITI Aayog CEO BVR Subrahmanyam confirmed that India has overtaken Japan to become the world’s fourth-largest economy, citing the latest International Monetary Fund data. The IMF’s April 2025 World Economic Outlook estimates India’s nominal GDP will reach $4.187 trillion, slightly surpassing Japan’s projected $4.186 trillion. This shift underscores Japan’s declining share in the global economy and highlights a regional power rebalancing in Asia. Tokyo’s ¥980 billion shield to counter Trump’s tariffs According to the New York Times, in a bid to cushion the domestic blow from rising tariffs and inflation, the Japanese government has unveiled a ¥980 billion ($6.3 billion) emergency spending package. The funds reportedly aim to subsidise energy costs for households and provide support to small and medium-sized enterprises (SMEs) struggling under new trade constraints. Cabinet Secretary Yoshimasa Hayashi announced the package earlier this week, saying it was designed to “fully support” the population during a volatile economic phase. As per Reuters, the measures are also politically timed — the Kishida administration faces an upper house election in July, and public frustration is growing over stagnant wages and higher consumer prices. Meanwhile, Japan’s efforts to negotiate tariff relief from the US have hit a wall. Tokyo’s top trade envoy, Ryosei Akazawa, met Trump administration officials in Washington last week, but talks reportedly stalled. Trump officials have signalled that Japan’s primary demand an exemption from auto tariffs is currently off the table. Hopes now rest on the upcoming G7 Summit in Canada, where informal discussions may resume. Japan’s decline in economic influence symbolised by the loss of its top creditor status and its fall behind India in GDP rankings reflects more than just statistical shifts. It signals an urgent need for economic renewal in a nation facing demographic decline, external trade pressure, and internal stagnation. The government’s recent fiscal package offers short-term relief, but structural reforms are needed to chart a more sustainable path forward. Analysts point to innovation, productivity gains, and trade diversification as key to Japan’s future competitiveness. As global economic power continues to shift and trade alliances reshape, Japan must adapt or risk fading further from the world’s economic centre stage.

Amid global trade tension, Japan has lost its position as the world's largest creditor nation for the first time in over three decades, according to data from Japan's Ministry of Finance.&nbsp;

Japan loses top creditor rank as economic troubles deepen

Japan’s central bank is urging caution as food inflation drives consumer prices higher, challenging policymakers’ efforts to sustain stable economic recovery. The Bank of Japan (BOJ), which has long battled deflationary pressures, is now warning of upside risks to inflation due to a global supply crunch, particularly in food commodities. &nbsp;According to Reuters, Japan’s core Consumer Price Index (CPI) rose 3.5 per cent in April 2025 from a year earlier, marking the fastest increase since January 2023.&nbsp;&nbsp;The sharp rise was mainly fuelled by a 98.6 per cent surge in rice prices, spotlighting the fragility of food supply chains.<h2>BOJ Governor calls for vigilance amid supply shocks</h2>Addressing a BOJ-hosted conference on Tuesday, Governor Kazuo Ueda said the central bank must scrutinise how food price inflation may influence underlying inflation trends.&nbsp;“We are facing another round of supply shocks in the form of food price increases,” Ueda said, as quoted by Reuters. While the bank’s baseline view expects these effects to diminish over time, Ueda noted that “underlying inflation is now closer to 2 per cent than a few years ago,” necessitating heightened vigilance.The governor reiterated that the BOJ is prepared to raise interest rates further if upcoming data strengthens the case for economic recovery aligning with the bank’s forecast. In January 2025, the BOJ raised short-term interest rates to 0.5 per cent, ending its decade-long ultra-loose monetary policy regime.<h2>Japan’s inflation amid global trade tension and US tariffs</h2>Japan’s inflation story is not playing out in isolation. The recent escalation of US tariffs, particularly on Chinese imports has triggered ripple effects across the global economy. These trade frictions have disrupted supply chains, raised input costs, and contributed to a new wave of imported inflation in countries like Japan.&nbsp;As per Reuters, the BOJ has been forced to downgrade its growth forecasts due to rising trade policy uncertainties, acknowledging that the risks to economic activity and price stability are skewed to the downside for fiscal 2025 and 2026.&nbsp;Despite the setbacks, BOJ policymakers maintain a cautiously optimistic stance. The central bank continues to expect underlying inflation to gradually approach its 2 per cent target over the second half of its forecast horizon, which runs through fiscal 2027, according to BOJ statements cited by Reuters. &nbsp;However, the path ahead remains uncertain. With the yen under pressure, import costs rising, and consumer spending showing signs of fatigue, Japan’s economy may struggle to absorb further inflation without hurting domestic demand.<h2>No preconceptions, says BOJ</h2>Governor Ueda has emphasised that the BOJ will assess incoming economic data “without any preconceptions,” given the extremely high uncertainties surrounding both domestic conditions and the global outlook. He also noted the importance of striking the right balance between supporting growth and containing inflationary risks.&nbsp;“To the extent that incoming data allows us to gain more confidence in the baseline scenario—as economic activity and prices improve—we will adjust the degree of monetary easing as needed,” Ueda said, as per Reuters.&nbsp;Japan may finally be inching closer to its long-term inflation goal, but the forces driving this shift—soaring food prices and global trade turbulence are far from ideal. While the BOJ has signalled that interest rate hikes are possible, the bank is proceeding with measured caution.&nbsp;With food inflation surging, US tariffs disrupting global trade, and domestic growth faltering, Japan’s economic policymakers face a complex matrix of risks. And as Governor Ueda’s remarks suggest, the next move may depend less on traditional inflation signals and more on how the global economy unfolds in the coming months. &nbsp;

Business & Economy: The Bank of Japan core CPI rose 3.5% in April 2025, the fastest increase since January 2023, primarily due to a 986.6% surge in rice prices.

Japan’s central bank is urging caution as food inflation drives consumer prices higher, challenging policymakers’ efforts to sustain stable economic recovery. The Bank of Japan (BOJ), which has long battled deflationary pressures, is now warning of upside risks to inflation due to a global supply crunch, particularly in food commodities. According to Reuters, Japan’s core Consumer Price Index (CPI) rose 3.5 per cent in April 2025 from a year earlier, marking the fastest increase since January 2023. The sharp rise was mainly fuelled by a 98.6 per cent surge in rice prices, spotlighting the fragility of food supply chains. BOJ Governor calls for vigilance amid supply shocks Addressing a BOJ-hosted conference on Tuesday, Governor Kazuo Ueda said the central bank must scrutinise how food price inflation may influence underlying inflation trends. “We are facing another round of supply shocks in the form of food price increases,” Ueda said, as quoted by Reuters. While the bank’s baseline view expects these effects to diminish over time, Ueda noted that “underlying inflation is now closer to 2 per cent than a few years ago,” necessitating heightened vigilance. The governor reiterated that the BOJ is prepared to raise interest rates further if upcoming data strengthens the case for economic recovery aligning with the bank’s forecast. In January 2025, the BOJ raised short-term interest rates to 0.5 per cent, ending its decade-long ultra-loose monetary policy regime. Japan’s inflation amid global trade tension and US tariffs Japan’s inflation story is not playing out in isolation. The recent escalation of US tariffs, particularly on Chinese imports has triggered ripple effects across the global economy. These trade frictions have disrupted supply chains, raised input costs, and contributed to a new wave of imported inflation in countries like Japan. As per Reuters, the BOJ has been forced to downgrade its growth forecasts due to rising trade policy uncertainties, acknowledging that the risks to economic activity and price stability are skewed to the downside for fiscal 2025 and 2026. Despite the setbacks, BOJ policymakers maintain a cautiously optimistic stance. The central bank continues to expect underlying inflation to gradually approach its 2 per cent target over the second half of its forecast horizon, which runs through fiscal 2027, according to BOJ statements cited by Reuters. However, the path ahead remains uncertain. With the yen under pressure, import costs rising, and consumer spending showing signs of fatigue, Japan’s economy may struggle to absorb further inflation without hurting domestic demand. No preconceptions, says BOJ Governor Ueda has emphasised that the BOJ will assess incoming economic data “without any preconceptions,” given the extremely high uncertainties surrounding both domestic conditions and the global outlook. He also noted the importance of striking the right balance between supporting growth and containing inflationary risks. “To the extent that incoming data allows us to gain more confidence in the baseline scenario—as economic activity and prices improve—we will adjust the degree of monetary easing as needed,” Ueda said, as per Reuters. Japan may finally be inching closer to its long-term inflation goal, but the forces driving this shift—soaring food prices and global trade turbulence are far from ideal. While the BOJ has signalled that interest rate hikes are possible, the bank is proceeding with measured caution. With food inflation surging, US tariffs disrupting global trade, and domestic growth faltering, Japan’s economic policymakers face a complex matrix of risks. And as Governor Ueda’s remarks suggest, the next move may depend less on traditional inflation signals and more on how the global economy unfolds in the coming months.

Japan's central bank's governor Kazuo Ueda warns of inflation risks due to the global supply crunch, particularly in food commodities.&nbsp;

BOJ raises red flag on food inflation as Japan’s core CPI hits 3.5 per cent

Core inflation in Japan's capital climbed for the fourth consecutive month in August, data showed on Friday, comfortably staying above the Bank of Japan's 2 per cent target and supporting market expectations of further interest rate increases.

The Tokyo core consumer price index (CPI), which excludes volatile fresh food prices, rose 2.4 per cent in August from a year earlier, surpassing the median market forecast of 2.2 per cent and the 2.2 per cent increase recorded in July.

A separate index that excludes both fresh food and fuel costs, closely monitored by the BOJ as a broader gauge of price trends, rose 1.6 per cent in August from a year earlier, up from a 1.5 per cent rise in July.

The uptick in Tokyo inflation, seen as a precursor to nationwide trends, was largely driven by the gradual phase-out of government subsidies on utility bills and higher rice prices amid worsening shortages due to extreme heat.

"Some one-time factors pushed up inflation but the underlying inflation trend will continue to moderate in coming months," said Takeshi Minami, chief economist at Norinchukin Research Institute.

However, with wage growth anticipated to support private consumption and drive up inflation, the case is strengthening for the Bank of Japan to raise interest rates further, Minami noted.

Separately, the Ministry of Economy, Trade and Industry upgraded its assessment of industrial output for the first time since March last year after data showed output increased 2.8 per cent in July from the previous month.

Manufacturers surveyed by the ministry expect output to rise 2.2 per cent in August but decline by 3.3 per cent in September, the data indicated.

Still, an official advised caution about the outlook, noting that production plans might not be as sturdy as projected in August.

The BOJ ended its negative interest rate policy in March and raised its short-term policy rate to 0.25 per cent in July, marking significant steps away from a decade-long radical stimulus approach.

BOJ Governor Kazuo Ueda stated that the central bank would consider further rate hikes if inflation appears set to sustainably reach its 2 per cent target in the coming years, as forecasted by the BOJ board.

The central bank expects that rising wages will push up service prices and help keep inflation around the 2 per cent mark.

Core inflation in Japan's capital climbed for the fourth consecutive month in August, data showed on Friday, comfortably staying above the Bank of Japan's 2 per cent target and supporting market expectations of further interest rate increases.

Core inflation in Japan's capital climbed for the fourth consecutive month in August, data showed on Friday, comfortably staying above the Bank of Japan's 2 per cent target and supporting market expectations of further interest rate increases. The Tokyo core consumer price index (CPI), which excludes volatile fresh food prices, rose 2.4 per cent in August from a year earlier, surpassing the median market forecast of 2.2 per cent and the 2.2 per cent increase recorded in July. A separate index that excludes both fresh food and fuel costs, closely monitored by the BOJ as a broader gauge of price trends, rose 1.6 per cent in August from a year earlier, up from a 1.5 per cent rise in July. The uptick in Tokyo inflation, seen as a precursor to nationwide trends, was largely driven by the gradual phase-out of government subsidies on utility bills and higher rice prices amid worsening shortages due to extreme heat. "Some one-time factors pushed up inflation but the underlying inflation trend will continue to moderate in coming months," said Takeshi Minami, chief economist at Norinchukin Research Institute. However, with wage growth anticipated to support private consumption and drive up inflation, the case is strengthening for the Bank of Japan to raise interest rates further, Minami noted. Separately, the Ministry of Economy, Trade and Industry upgraded its assessment of industrial output for the first time since March last year after data showed output increased 2.8 per cent in July from the previous month. Manufacturers surveyed by the ministry expect output to rise 2.2 per cent in August but decline by 3.3 per cent in September, the data indicated. Still, an official advised caution about the outlook, noting that production plans might not be as sturdy as projected in August. The BOJ ended its negative interest rate policy in March and raised its short-term policy rate to 0.25 per cent in July, marking significant steps away from a decade-long radical stimulus approach. BOJ Governor Kazuo Ueda stated that the central bank would consider further rate hikes if inflation appears set to sustainably reach its 2 per cent target in the coming years, as forecasted by the BOJ board. The central bank expects that rising wages will push up service prices and help keep inflation around the 2 per cent mark.

Tokyo core inflation rises, strengthening the case for BOJ rate hikes

Core consumer inflation in Japan picked up for a third straight month in July, data showed on Friday, but further interest rate hikes by the central bank could be complicated by slowing demand-driven price growth in the coming months.

The nationwide core consumer price index (CPI), excluding fresh food items, climbed 2.7 per cent from a year earlier, more than a 2.6 per cent climb in June. It matched the median market forecast and kept the inflation rate at or above the central bank's 2 per cent target for the 28th straight month.

However, the "core core" index, which strips out both fresh food and energy costs and is considered by the BOJ to be the closest proxy for its central measure of the overall broader trend in inflation, advanced 1.9 per cent, compared with a rise of 2.2 per cent in June. It fell below the key 2 per cent line for the first time since September 2022.

"The increase in the core CPI reflected a phase-out of government subsidies to curb household utility bills, and with that factor excluded, the overall inflation has been slowing," said Masato Koike, senior economist at Sompo Institute Plus.

Relief on utility bills was restored and the import costs are now being driven down by the recent rebound of the yen, so the core CPI growth "is likely to slow down hereafter," he said.

It will, henceforth, be the inflation data instrumental in further decisions on rate hikes by the BOJ. It surprised markets last July by raising interest rates to a 15-year high and signalled its readiness to further hike the cost of borrowing amid growing prospects of inflation durably reaching its 2 per cent target.

It was the hawkish tone of the BOJ that set the battered yen soaring and sent Tokyo stocks plunging in their biggest single-day rout since 1987's Black Monday sell-off. Markets have since stabilised.

BOJ Governor Kazuo Ueda was summoned on Friday to explain the BOJ's decision in July to raise interest rates, and he reaffirmed his resolve to raise them again if inflation remained on track to hit the 2 per cent target sustainably.

He also mentioned that the central bank would "be highly vigilant to market developments for the time being" as the financial markets remained unstable.

Despite the tepid currency market reaction to the data on inflation, the repeated statement of Ueda's readiness for possible future rate hikes pushed up the yen. On Friday afternoon, after fluctuating on some of the other comments, the yen traded at around 145.50 per dollar.

Data from last week showed that Japan's economy rebounded much faster than expected in the second quarter on the back of solid consumption, bolstering the case for the central bank to stay on course for monetary policy tightening.

Core consumer inflation in Japan picked up for a third straight month in July, data showed on Friday, but further interest rate hikes by the central bank could be complicated by slowing demand-driven price growth in the coming months.

Core consumer inflation in Japan picked up for a third straight month in July, data showed on Friday, but further interest rate hikes by the central bank could be complicated by slowing demand-driven price growth in the coming months. The nationwide core consumer price index (CPI), excluding fresh food items, climbed 2.7 per cent from a year earlier, more than a 2.6 per cent climb in June. It matched the median market forecast and kept the inflation rate at or above the central bank's 2 per cent target for the 28th straight month. However, the "core core" index, which strips out both fresh food and energy costs and is considered by the BOJ to be the closest proxy for its central measure of the overall broader trend in inflation, advanced 1.9 per cent, compared with a rise of 2.2 per cent in June. It fell below the key 2 per cent line for the first time since September 2022. "The increase in the core CPI reflected a phase-out of government subsidies to curb household utility bills, and with that factor excluded, the overall inflation has been slowing," said Masato Koike, senior economist at Sompo Institute Plus. Relief on utility bills was restored and the import costs are now being driven down by the recent rebound of the yen, so the core CPI growth "is likely to slow down hereafter," he said. It will, henceforth, be the inflation data instrumental in further decisions on rate hikes by the BOJ. It surprised markets last July by raising interest rates to a 15-year high and signalled its readiness to further hike the cost of borrowing amid growing prospects of inflation durably reaching its 2 per cent target. It was the hawkish tone of the BOJ that set the battered yen soaring and sent Tokyo stocks plunging in their biggest single-day rout since 1987's Black Monday sell-off. Markets have since stabilised. BOJ Governor Kazuo Ueda was summoned on Friday to explain the BOJ's decision in July to raise interest rates, and he reaffirmed his resolve to raise them again if inflation remained on track to hit the 2 per cent target sustainably. He also mentioned that the central bank would "be highly vigilant to market developments for the time being" as the financial markets remained unstable. Despite the tepid currency market reaction to the data on inflation, the repeated statement of Ueda's readiness for possible future rate hikes pushed up the yen. On Friday afternoon, after fluctuating on some of the other comments, the yen traded at around 145.50 per dollar. Data from last week showed that Japan's economy rebounded much faster than expected in the second quarter on the back of solid consumption, bolstering the case for the central bank to stay on course for monetary policy tightening.

Japan's core inflation rises, but demand-driven growth remains under 2 per cent

The Japanese government is contemplating on officially declaring an end to the prolonged battle against deflation; Kyodo News reported citing sources familiar with the matter.<o:p></o:p>

According to the report, this consideration comes after nearly two decades of the country grappling with moderate price declines. <o:p></o:p>

While Japan has consistently denied being in a state of deflation, dispelling entrenched public perceptions of stagnant prices and wages has proven challenging.<o:p></o:p>

"The recent bout of inflation, driven mostly by higher import costs, and the prospect of sustainable wage growth is seen as clearing the way for Japan to end its war on deflation," the sources in correspondence with Kyodo News stated. <o:p></o:p>

The government is closely monitoring labour-management wage negotiations and the trajectory of inflation to ascertain whether conditions have matured for a definitive departure from deflationary pressures.<o:p></o:p>

For Japan, entrenched deflationary pressures have perpetuated a detrimental cycle, wherein falling prices have constrained corporate profits and impeded wage growth, subsequently hampering private consumption—a pivotal component of the economy. <o:p></o:p>

Thus, an official declaration will mark the removal of a major growth obstacle for Japan's economy.<o:p></o:p>

Potential avenues for a formal announcement include Prime Minister Fumio Kishida or Cabinet members making a public declaration, or the government issuing a statement in its monthly economic report. <o:p></o:p>

However, government officials indicate that any decision will hinge on economic performance and ultimately lie within the purview of the Prime Minister.<o:p></o:p>

"June will be important," noted one government official, citing upcoming policy measures aimed at bolstering domestic demand, including income and residence tax cuts for Japanese households. <o:p></o:p>

However, there exists caution within the government regarding the timing of declaring an end to deflation, given lingering uncertainties in the price outlook and broader economic landscape.<o:p></o:p>

Despite signs of progress, scepticism persists within certain quarters of the government regarding the necessity and timing of officially ending the deflation narrative. <o:p></o:p>

Some officials assert that maintaining the current stance, which denies Japan being in a state of deflation, remains a priority. <o:p></o:p>

They highlight potential reputational risks should economic conditions deteriorate post-declaration.<o:p></o:p>

The Bank of Japan's aggressive monetary easing measures, in tandem with a joint agreement with the government in 2013 aimed at achieving 2 percent inflation, have been significant efforts to combat deflation. <o:p></o:p>

However, BOJ Chief Kazuo Ueda recently acknowledged Japan's state of inflation, fuelling speculation about potential shifts in monetary policy.<o:p></o:p>

Critical economic indicators, including Japan's closing output gap, indicate a pickup in demand—a positive sign for achieving stable inflation. <o:p></o:p>

Yet, amidst cautious optimism, government officials stress the need for prudence and vigilance, particularly given the unforeseen recessionary episode at the end of 2023.

<o:p>(With inputs from agencies)</o:p>

The Japanese government is contemplating on officially declaring an end to the prolonged battle against deflation; Kyodo News reported citing sources familiar with the matter.

The Japanese government is contemplating on officially declaring an end to the prolonged battle against deflation; Kyodo News reported citing sources familiar with the matter. According to the report, this consideration comes after nearly two decades of the country grappling with moderate price declines. While Japan has consistently denied being in a state of deflation, dispelling entrenched public perceptions of stagnant prices and wages has proven challenging. "The recent bout of inflation, driven mostly by higher import costs, and the prospect of sustainable wage growth is seen as clearing the way for Japan to end its war on deflation," the sources in correspondence with Kyodo News stated. The government is closely monitoring labour-management wage negotiations and the trajectory of inflation to ascertain whether conditions have matured for a definitive departure from deflationary pressures. For Japan, entrenched deflationary pressures have perpetuated a detrimental cycle, wherein falling prices have constrained corporate profits and impeded wage growth, subsequently hampering private consumption—a pivotal component of the economy. Thus, an official declaration will mark the removal of a major growth obstacle for Japan's economy. Potential avenues for a formal announcement include Prime Minister Fumio Kishida or Cabinet members making a public declaration, or the government issuing a statement in its monthly economic report. However, government officials indicate that any decision will hinge on economic performance and ultimately lie within the purview of the Prime Minister. "June will be important," noted one government official, citing upcoming policy measures aimed at bolstering domestic demand, including income and residence tax cuts for Japanese households. However, there exists caution within the government regarding the timing of declaring an end to deflation, given lingering uncertainties in the price outlook and broader economic landscape. Despite signs of progress, scepticism persists within certain quarters of the government regarding the necessity and timing of officially ending the deflation narrative. Some officials assert that maintaining the current stance, which denies Japan being in a state of deflation, remains a priority. They highlight potential reputational risks should economic conditions deteriorate post-declaration. The Bank of Japan's aggressive monetary easing measures, in tandem with a joint agreement with the government in 2013 aimed at achieving 2 percent inflation, have been significant efforts to combat deflation. However, BOJ Chief Kazuo Ueda recently acknowledged Japan's state of inflation, fuelling speculation about potential shifts in monetary policy. Critical economic indicators, including Japan's closing output gap, indicate a pickup in demand—a positive sign for achieving stable inflation. Yet, amidst cautious optimism, government officials stress the need for prudence and vigilance, particularly given the unforeseen recessionary episode at the end of 2023. (With inputs from agencies)

Japan government contemplates declaring an end to the deflation battle, sources say

Japan is gearing up for a second consecutive year of significant wage hikes, presenting an opportunity for the Bank of Japan (BOJ) to consider stepping back from a decade-long monetary stimulus. The substantial pay increases witnessed this year, the largest in over 30 years, are expected to continue into 2024.&nbsp;

According to Reuters, the move is seen as a pivotal shift away from deflation, with major companies such as Suntory Holdings, Meiji Yasuda Life Insurance, and Bic Camera announcing plans for substantial pay bumps. Takeshi Niinami, CEO of Suntory Holdings, sees this as a paradigm shift, stating, "What's going on is a big paradigm shift away from deflation and towards inflation."

The consistent pressure from Prime Minister Fumio Kishida on companies to increase pay and offset the impact of rising living costs is a driving force behind this trend. The back-to-back annual wage increases align with Kishida's efforts to ensure robust pay hikes and prevent economic stagnation.

With inflation surpassing the BOJ's 2 per cent target for over a year, companies are under unprecedented pressure to sustain wage growth. Rengo, Japan's largest trade union confederation, demands further pay hikes, with plans to ask for "5 per cent or higher" in the upcoming negotiations. UA Zensen, another major union, is set to demand a 6 per cent rise.

Analysts and economists foresee sustained wage growth in 2024, exceeding the levels witnessed this year. Atsushi Takeda, Chief Economist at Itochu Economic Research Institute, notes that a combination of inflation, a tight labour market, and healthy corporate profits will contribute to maintaining momentum for wage hikes. The ability of companies to pass on higher costs in their supply chains further supports this trend. However, the key challenge remains ensuring that wage increases extend to smaller firms and regional areas, as highlighted by a BOJ report in October.

The potential continuation of robust wage growth offers Prime Minister Kishida a tool to navigate economic challenges and rebuild public support. Kishida's measures include subsidies and tax incentives for companies implementing significant pay hikes, benefiting even loss-making small and medium-sized enterprises (SMEs).

These strategies aim to empower SMEs in negotiations and stimulate broader wage growth. Kishida's call for the business community to surpass this year's wage growth in 2024 reflects the urgency and commitment to this economic agenda.

For the Bank of Japan, sustained wage growth becomes a crucial factor in considering an exit from its controversial monetary stimulus. Market speculation suggests the BOJ could end negative interest rates around April, pending further clarity on wages. Clues may emerge from the BOJ's quarterly tankan business survey in December and wage talks between major business lobbies and unions in January. However, the ultimate test lies in whether wage hikes extend beyond major corporations to smaller firms and regional economies, ensuring a comprehensive and inclusive economic recovery.

(With inputs from Reuters)

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Japan is gearing up for a second consecutive year of significant wage hikes, presenting an opportunity for the Bank of Japan (BOJ) to consider stepping back from a decade-long monetary stimulus.

Japan is gearing up for a second consecutive year of significant wage hikes, presenting an opportunity for the Bank of Japan (BOJ) to consider stepping back from a decade-long monetary stimulus. The substantial pay increases witnessed this year, the largest in over 30 years, are expected to continue into 2024. According to Reuters, the move is seen as a pivotal shift away from deflation, with major companies such as Suntory Holdings, Meiji Yasuda Life Insurance, and Bic Camera announcing plans for substantial pay bumps. Takeshi Niinami, CEO of Suntory Holdings, sees this as a paradigm shift, stating, "What's going on is a big paradigm shift away from deflation and towards inflation." The consistent pressure from Prime Minister Fumio Kishida on companies to increase pay and offset the impact of rising living costs is a driving force behind this trend. The back-to-back annual wage increases align with Kishida's efforts to ensure robust pay hikes and prevent economic stagnation. With inflation surpassing the BOJ's 2 per cent target for over a year, companies are under unprecedented pressure to sustain wage growth. Rengo, Japan's largest trade union confederation, demands further pay hikes, with plans to ask for "5 per cent or higher" in the upcoming negotiations. UA Zensen, another major union, is set to demand a 6 per cent rise. Analysts and economists foresee sustained wage growth in 2024, exceeding the levels witnessed this year. Atsushi Takeda, Chief Economist at Itochu Economic Research Institute, notes that a combination of inflation, a tight labour market, and healthy corporate profits will contribute to maintaining momentum for wage hikes. The ability of companies to pass on higher costs in their supply chains further supports this trend. However, the key challenge remains ensuring that wage increases extend to smaller firms and regional areas, as highlighted by a BOJ report in October. The potential continuation of robust wage growth offers Prime Minister Kishida a tool to navigate economic challenges and rebuild public support. Kishida's measures include subsidies and tax incentives for companies implementing significant pay hikes, benefiting even loss-making small and medium-sized enterprises (SMEs). These strategies aim to empower SMEs in negotiations and stimulate broader wage growth. Kishida's call for the business community to surpass this year's wage growth in 2024 reflects the urgency and commitment to this economic agenda. For the Bank of Japan, sustained wage growth becomes a crucial factor in considering an exit from its controversial monetary stimulus. Market speculation suggests the BOJ could end negative interest rates around April, pending further clarity on wages. Clues may emerge from the BOJ's quarterly tankan business survey in December and wage talks between major business lobbies and unions in January. However, the ultimate test lies in whether wage hikes extend beyond major corporations to smaller firms and regional economies, ensuring a comprehensive and inclusive economic recovery. (With inputs from Reuters) WATCH WION LIVE HERE

Japan's wage boom paves the way for BOJ exit, boosts inflation battle

At a time when Japan is grappling with the challenge of a massive surge in prices of essentials, Emperor Naruhito on Thursday (February 23) delivered his first birthday address after he ascended the throne four years ago. Covid-related restrictions delayed his public birthday appearance, an annual tradition in Japan, over the last four years. In a message for the people of the nation, he emphathised with those in vulnerable positions. “My heart feels pain when I think about people in vulnerable positions, who are aged, who have disabilities, who are in need of support, and people in poverty and their children," the Emperor underlined.

The emperor, who was crowned in 2019, turned 63 on Thursday. He also praised people who were supporting the vulnerable groups in the difficult times and expressed his gratitude. "I feel very happy to be celebrating my birthday before the public for the first time," he further shared. His wife Empress Masako, his daughter Aiko, 21, and his brother Crown Prince Akishino were among those who accompanied him.

Also watch: Worrying sign for Japan's economy as factory activity sinks

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<h2>Surging prices in Japan</h2>

&nbsp;

 
Consumer inflation in Japan hit four-decade high last year. There have been no signs of&nbsp; relief ever since. In January, inflation figures rose 9.5 per cent from a year earlier, according to reports.&nbsp; A report by BBC highlighted that consumer inflation was at its highest in January since 1981. Despite the worrying figures, the inflation rate in the world's third largest economy has remained one of the lowest.

Not just Japan, other nations too are tackling a similar challenge. "Global growth is slowing sharply in the face of elevated inflation, higher interest rates, reduced investment, and disruptions caused by Russia’s invasion of Ukraine," the World Bank’s Global Economic Prospects report highlighted in January.

Also read: <a href="https://www.wionews.com/world/explained-japan-poised-to-raise-age-of-consent-to-16-after-over-a-century-why-now-564542">Explained | Japan poised to raise age of consent to 16 after over a century. Why now?</a>

&nbsp;

"Given fragile economic conditions, any new adverse development—such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic, or escalating geopolitical tensions—could push the global economy into recession. This would mark the first time in more than 80 years that two global recessions have occurred within the same decade," it further stressed.

(With agency inputs)

&nbsp;

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At a time when Japan is grappling with the challenge of a massive surge in prices of essentials, Emperor Naruhito on Thursday (February 23) delivered his first birthday address after he ascended the throne four years ago.

At a time when Japan is grappling with the challenge of a massive surge in prices of essentials, Emperor Naruhito on Thursday (February 23) delivered his first birthday address after he ascended the throne four years ago. Covid-related restrictions delayed his public birthday appearance, an annual tradition in Japan, over the last four years. In a message for the people of the nation, he emphathised with those in vulnerable positions. “My heart feels pain when I think about people in vulnerable positions, who are aged, who have disabilities, who are in need of support, and people in poverty and their children," the Emperor underlined. The emperor, who was crowned in 2019, turned 63 on Thursday. He also praised people who were supporting the vulnerable groups in the difficult times and expressed his gratitude. "I feel very happy to be celebrating my birthday before the public for the first time," he further shared. His wife Empress Masako, his daughter Aiko, 21, and his brother Crown Prince Akishino were among those who accompanied him. Also watch: Worrying sign for Japan's economy as factory activity sinks × Surging prices in Japan Consumer inflation in Japan hit four-decade high last year. There have been no signs of relief ever since. In January, inflation figures rose 9.5 per cent from a year earlier, according to reports. A report by BBC highlighted that consumer inflation was at its highest in January since 1981. Despite the worrying figures, the inflation rate in the world's third largest economy has remained one of the lowest. Not just Japan, other nations too are tackling a similar challenge. "Global growth is slowing sharply in the face of elevated inflation, higher interest rates, reduced investment, and disruptions caused by Russia’s invasion of Ukraine," the World Bank’s Global Economic Prospects report highlighted in January. Also read: Explained | Japan poised to raise age of consent to 16 after over a century. Why now? "Given fragile economic conditions, any new adverse development—such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic, or escalating geopolitical tensions—could push the global economy into recession. This would mark the first time in more than 80 years that two global recessions have occurred within the same decade," it further stressed. (With agency inputs) WATCH WION LIVE HERE You can now write for wionews.com and be a part of the community. Share your stories and opinions with us here.

In Japan emperor Naruhito's 1st birthday address, message for those hit by inflation

Japan's inflation rose by almost 4% in December from a year ago, hitting a new 41-year high. The inflation surge has also triggered a debate if the Central Bank will now move from its decades-long quality of ultra low interest rates.

Japan's inflation hits new 41-year high; consumer inflation rises 4% from last year

Japan and a weak Yen has pushed up cost of imported commodities in the country, they were already surging due to global supply constraints now. This has led to the jump in Japan's core consumer inflation that has accelerated to 40-year high.

World Business Watch: Japan's inflation hits 40-year high; commodities price surge

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