Japan’s Economy Minister Says Cost Pass-Through Remains Limited Amid Inflation Concerns

On August 4, Economy Minister Minoru Kiuchi told reporters that the rise in consumer prices has been modest and that the pass-through of higher costs from the Middle-East conflict onto Japanese consumer goods “has been limited so far.” He noted the consumer-price index (CPI) rose 1.7 % year-on-year in June, describing the increase as “only moderate.” Kiuchi warned the government must stay vigilant for a gradual transmission of costs to food and other items through autumn and said real wages are expected to increase by nearly 1 % in the fiscal year ending March 2027, while emphasizing fuel subsidies to cushion households.

Japan's Kiuchi declines to name FX level, watching impact closely

The minister’s tone contrasts with the Bank of Japan’s (BOJ) more cautious stance. In June, the BOJ raised its policy rate to 1 %, a 31-year high, and warned of inflation overshooting its 2 % target. The central bank expects consumer inflation to accelerate in the latter half of the year before slowing.

Reuters

U.S. Treasury Secretary Scott Bessent urged the BOJ to follow the July 31 yen-intervention with “policy and fundamentals,” while former BOJ executive Kazuo Momma warned that “intervention is a strategy that buys time and could end up being a waste without being followed up with BOJ rate hikes.”

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The yen’s weakness has amplified import-price pressures. After trading in a narrow range of 161-164 yen per dollar through most of July, the currency briefly strengthened after the intervention, but analysts expect the effect to be temporary. In June, import prices rose 29.7 % year-on-year in yen terms, highlighting the inflationary impact of the depreciated yen.

BOJ on hold in July, but case for another rate hike is taking shape Japan Economy Minister Kiuchi: Pass-through of rising costs has been limited so far Japan's Kiuchi declines to name FX level, watching impact closely ReutersJapan’s June Wage Growth Hits 3.4% as Expected, Supporting BOJ’s Policy Path

• CPI (June): +1.7 % YoY – Kiuchi (Reuters, Aug 4)

Reuters

• Core inflation (June): +1.6 % YoY – Business Times (July 2024)

BOJ on hold in July, but case for another rate hike is taking shape

• Producer-price index (June): +7.1 % YoY – Business Times (July 2024)

BOJ on hold in July, but case for another rate hike is taking shape

• Import prices (June, yen terms): +29.7 % YoY – Business Times (July 2024)

BOJ on hold in July, but case for another rate hike is taking shape

• Nominal wage growth (June): +3.4 % YoY – Ministry of Health, Labour and Welfare

Japan’s June Wage Growth Hits 3.4% as Expected, Supporting BOJ’s Policy Path

• Real wage change (June): -1.1 % YoY – Ministry data

Japan’s June Wage Growth Hits 3.4% as Expected, Supporting BOJ’s Policy Path

• Forecast real-wage increase FY 2026/27: ? +1 % – Kiuchi (Reuters, Aug 4)

Reuters

• “The overall consumer price index rose 1.7% year-on-year in June, showing only moderate rises,” — Minoru Kiuchi

Reuters

• “Intervention is a strategy that buys time and could end up being a waste without being followed up with BOJ rate hikes,” — Kazuo Momma

Reuters

• August 27: BOJ Deputy Governor Ryozo Himino will speak, potentially signaling timing for a September rate hike.

Reuters

• End-August: Treasury Secretary Scott Bessent to meet BOJ Governor Kazuo Ueda at a G20 finance gathering.

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• September 17-18: BOJ’s next policy meeting, where a decision on a September or October rate hike is expected.

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