Youths most hit by Japan’s inflation

The Cabinet Office of Japan has released its annual economic report, highlighting the challenges faced by consumers in the country, particularly the younger generation. According to the report, inflation has risen twice as fast as the Bank of Japan’s target of 2%, leading to higher costs for consumers. The rise in prices has come amid excess savings of approximately $498 billion accumulated during the COVID-19 pandemic, which have yet to support consumption.

The report further indicated that the lack of robust wage growth has made it difficult to change the dovish monetary policy and that the Japanese economy is facing inflationary pressures and fears of a global recession. The services sector has been the only support for the economy so far, but the report warned that private consumption may take a hit due to the worsening of household sentiment.

Spending on goods and services among people under the age of 34 has been declining, and the report attributes this to rising prices and growing concerns about future pension benefits and the sustainability of the social security system due to the aging of society. The trend has also been observed among those between the ages of 35 and 64, as well as those 65 and older.

Despite lagging behind the US and Europe in recovering from the COVID-19 economic fallout, expectations are high that the accumulation of excess savings will support the economy. However, the report stated that any boost to consumption is not clear at this point as people have not been dipping into their savings even in the face of rising prices.

The report also highlighted that Japanese companies have been raising prices of everyday goods to reflect higher raw material costs, amplified by the yen’s depreciation against the US dollar, but have yet to fully pass increased costs to consumers. Companies need to create more added value to enable pay hikes for employees and support wage growth, the report stated.

In conclusion, the Cabinet Office’s annual economic report highlights the challenges faced by consumers in Japan, particularly the younger generation, and the need for companies to create more added value to enable pay hikes for employees and support wage growth. The report is a comprehensive analysis of the current economic conditions in the country and the efforts being made to overcome them.