Japan’s consumer price inflation accelerated to 2.9 percent in September, up from 2.7 percent the previous month, according to official data. The rise in inflation is being driven by higher energy and import costs and reflects pressure on households from rising living expenses.
The fact that inflation has remained at or above the Bank of Japan’s 2 percent target for more than three years means the central bank cannot ignore price risks. The elevated inflation rate places additional policy pressure on the newly appointed Sanae Takaichi to act on cost-of-living issues and coordinate economic policy more tightly with the central bank.
As Prime Minister Takaichi begins her tenure, she has already ordered a fresh economic package aimed at easing the burden of inflation on households and firms. Measures are expected to include subsidies for energy bills, regional grants, and incentives for small and medium enterprises to raise wages and invest. The decisions she takes will be scrutinised by markets and voters alike, particularly given Japan’s longstanding challenge of balancing economic stimulus, inflation control and high public debt.
The monetary-fiscal policy mix is now at a defining moment. On the one hand the Bank of Japan faces calls to tighten policy to prevent inflation becoming entrenched. On the other hand the government under Takaichi emphasises wage-driven inflation and wants to maintain growth support. Coordinated action will be key: if inflation continues its upward trend unchecked, real incomes could suffer, consumer sentiment could weaken, and structural challenges such as the weak yen and rising import prices could deepen.
In summary, rising inflation in Japan is not just a statistical blip but a signal that policy needs to pivot. Prime Minister Takaichi’s response both in terms of targeted relief for households and in setting the tone for monetary-fiscal coordination could prove critical in determining whether Japan navigates this inflation phase smoothly or returns to stagflation risk.
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