On February 21, the Japanese Ministry of Internal Affairs and Communications announced that the Consumer Price Index (CPI) for January increased by 3.2%. The overall index excluding fresh food has risen for three consecutive years and five months. The “rice shortage” that began last summer continues to ferment, with Japanese rice prices in January rising over 70% year-on-year, reaching a historic high. Additionally, prices for fresh foods in Japan continue to rise significantly, with cabbage prices nearly tripling compared to the same period last year. The January Consumer Price Index (2020=100), excluding volatile fresh foods, was 109.8, up 3.2% from the same period last year. The growth rate exceeds the 3.0% level of the previous month, marking the third consecutive month of expansion. Including fresh foods, prices increased by 4.0%, reaching a 4% increase for the first time in two years.
In January, the Bank of Japan announced an increase in the policy interest rate from 0.25% to 0.5%, reaching the highest level in about 17 years. The Bank of Japan plans to raise interest rates again to curb rising prices. The Japanese government’s approach is also Keynesian, believing that raising the central bank’s interest rate will increase people’s savings tendency, reduce the amount of money in circulation, and thus curb inflation. However, the rate hike by the Japanese government is merely symbolic, serving as a façade even though this façade is already in tatters. The continuous increase in the price index for three years and five months has proven that the Japanese government’s measure of raising interest rates is ineffective.
