Consumer Prices Surge Amid Ukraine War and Yen Depreciation
In Japan, food prices have surged, causing the Engel coefficient, which represents the proportion of food expenses in living costs, to reach its highest level in 42 years since 1982.
On the 19th, the Nihon Keizai Shimbun reported that the Engel coefficient for households with two or more people from January to August this year was 28.0%, the highest annual average since 1982. Japan's Engel coefficient had been declining until the 2000s as household incomes increased, but it has been rising since the 2010s. For households with an annual income of 10 million to 12.5 million yen (approximately 91.6 million to 114.5 million KRW), the Engel coefficient was 25.5%, while for households earning less than 2 million yen (approximately 18.3 million KRW) annually, it was 33.7%. The Nihon Keizai Shimbun pointed out that the rise in food costs has had a greater impact on low-income households.
Since the start of the Russia-Ukraine war in 2022, Japan's consumer prices have risen sharply, compounded by the weak yen. According to the 'September Consumer Price Index' announced by the Ministry of Internal Affairs and Communications the day before, rice prices increased by 44.7%, marking the highest rise in 49 years. Pear prices rose by 13.4%, and tomatoes by 12.2% last month.
A representative from the Ministry of Internal Affairs and Communications stated, "There is a trend of refraining from purchasing vegetables, fruits, and meat." The Nihon Keizai Shimbun explained, "The rise in food prices is putting pressure on households and is a factor in consumption stagnation." Additionally, Kotaro Nakayama, an analyst at Nowcast, predicted, "Many food price hikes are scheduled after October, which may further pressure consumers' purchasing power."
In Japan, not only food but other items have also shown an upward trend. The consumer price index excluding fresh food in September rose by 2.4% compared to the same month last year. The Bank of Japan forecasted a 2.5% increase in consumer prices for 2024 in its July economic outlook report. In the upcoming House of Representatives election scheduled for the 27th, measures against high inflation are expected to be a major issue. The Liberal Democratic Party has promised to prepare comprehensive measures to address price increases, including emergency payments to low-income households and countermeasures against soaring electricity, gas, and fuel costs. The Constitutional Democratic Party pledged to provide partial tax credits on consumption tax for low-income households and to support them with emergency payments for the amounts not credited.
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