Rising Prices and Deteriorating Consumer Sentiment Driven by Higher Commodity Prices and a Weaker Yen

「In Japan, sustained strong wage increases and various forms of government policy support helped underpin real wages even as rising prices placed pressure on household budgets, and personal consumption remained firm. In corporate activity, although higher raw-material and resource prices pressured earnings, the spread of price pass-through in Japan, together with the dispelling of deflationary sentiment, enabled corporate earnings overall to remain at a high level.」

「There are concerns that the impact of inflation stemming from higher energy prices may not be resolved in the short term, and that downside risks will remain.」

「Although the Japanese economy benefited from favorable factors, including a recovery in personal consumption due to higher wages, stronger corporate appetite for capital investment, and improvements in employment and household conditions resulting from government economic measures, the effects of inflation originating from higher energy prices may not be resolved in the short term, and downside risks remain a concern.」

「Although the Japanese economy benefited from favourable conditions such as a recovery in personal consumption driven by wage growth, greater corporate appetite for capital investment, increased inbound demand, and improvements in employment and household conditions resulting from government economic measures, downside risks remain, including the impact of additional tariffs on manufacturing exports and further yen appreciation.」

「Personal consumption remained stagnant because of the impact of higher energy prices and consumer goods prices.」

「Although high prices, particularly for consumer goods, were a downside factor,」

「Rising energy prices and a weaker yen resulting from the widening interest-rate differential between Japan and the United States increased inflationary pressure, worsening consumer sentiment. Higher raw material costs also weighed on sentiment in the manufacturing sector.」

「In the domestic economy, easing supply constraints and the normalisation of economic activity led to a recovery trend, mainly in domestic demand. However, rising inflationary pressure caused by higher energy prices and a weaker yen resulting from the widening interest-rate differential between Japan and the United States worsened consumer sentiment and restrained the recovery in consumption. In addition, higher raw material costs weighed on sentiment in the manufacturing sector.」

「Rising energy prices and a weaker yen resulting from the widening interest-rate differential between Japan and the United States increased inflationary pressure, worsening consumer sentiment, while the decline in real purchasing power restrained the recovery in consumption.」

「In the domestic economy, demand for face-to-face services and other areas recovered after late March, when all quasi-emergency measures to prevent the spread of disease were lifted. However, consumer sentiment deteriorated as prices rose owing to higher energy prices following the worsening situation in Ukraine and a rapid depreciation of the yen resulting from the widening interest-rate differential between Japan and the United States. The resulting decline in real purchasing power put the brakes on the recovery in consumption after the pandemic subsided.」

「However, growth is expected to lack momentum because of factors including deteriorating consumer sentiment resulting from concerns over a sixth wave of infections and rising prices driven by higher resource prices and a weaker yen.」