00:00The Bank of Japan has raised interest rates to 1%, its highest in 31 years, as it reacts to inflation
00:06pressures linked to the Iran conflict and higher energy costs.
00:11The U.S. Federal Reserve and Bank of England are expected to hold rates steady for now, as policymakers wage
00:17geopolitical risk against slowing growth.
00:20Jose Gio Takeshita is a professor with the School of Management and Information at the University of Shizuoka.
00:28Well, actually, Japan is extremely vulnerable to external factors, particularly, you know, oil, considering the fact that we import 99
00:37.9% of oil.
00:39And great majority, in fact, over 90% comes from the Middle East.
00:43So obviously, you know, what's happening in the Strait of Hormuz is going to affect us directly.
00:49And one of the biggest things that, you know, the Japanese government and Bank of Japan is quite worried about
00:54is inflationary fear.
00:57Because Japan has so many layers, you know, of distribution, the Japanese public really hasn't felt, you know, the impact
01:05of inflation yet.
01:06But they will from around this summertime.
01:09So I think they're bracing themselves for further issues like this.
01:13So in order to basically to mitigate that, I think they're trying to basically put a cap beforehand.
01:19But Japan spent 30 years trying to create inflation.
01:24Why is it suddenly so worried about having too much of it?
01:29Well, firstly, because, as I just pointed out, you know, we're very vulnerable to external factors.
01:33I mean, we're already having shortage of personnel, shortage of materials.
01:38And on top of that, if we're going to have an increase of oil price, we do have the large
01:43number of reserves amongst all advanced nations, more than 240 days.
01:46But that said, we're very, very vulnerable.
01:49And in addition, if this is accommodated at the same time concurrently by weakening of the yen, that's double whamming.
01:56We get high oil price and low yen or weak yen.
02:02And that is going to basically flare up the inflationary fears that we're already seeing right now.
02:09Because, as you pointed out, we haven't seen the word inflation for well over two decades.
02:13But right now, you know, it's moving well over 2% target of CPI.
02:18So, basically, I know that the authorities are bracing themselves for the effect to be seen on consumer side.
02:26Should we stop calling this an inflation shock and just start saying, look, this is a just much more expensive
02:33world?
02:36Well, Japan isn't as expensive.
02:39Well, you know, if you come, if you're a foreigner coming into Japan, you probably feel that things are so
02:44cheap here because of the weakening of the yen.
02:46It's becoming very difficult for us Japanese to go overseas.
02:49So, yes, the world is becoming very expensive for us.
02:54But, again, you know, the wage rise in Japan has been very, very slow.
02:58In fact, until we had this, you know, oil price surge, Japan hadn't seen wage rise for well over 20
03:07years, which is quite amazing.
03:09And under that circumstance, if we're going to see, you know, inflation flaring up, obviously, the frustration amongst the public
03:16is going to go up.
03:17And for that reason, I think the government and Bank of Japan's announcement today clearly focuses on the CPI side,
03:26the inflation side.
03:27Rather than looking at the economy as a whole, you look at the comments, they're concentrated very much on being
03:32careful about how they can basically simmer down this condition of inflationary flare that is starting to blow up in
03:40Japan.
03:41What happens next if more countries start thinking like Japan?
03:47Well, you know, unfortunately, this is comparative analysis, and people keep asking me about, you know, what happens in, you
03:53know, Bank of Japan meeting.
03:54But I always say, I said this a thousand times, and I'll say it for the thousand the first time,
03:59but if you want to see where the yen is going, well, watch the FOMC on the 17th.
04:04Basically, what I'm trying to tell you here is that Japan, even if they do raise the rates, you look
04:10at the acceleration of other, you know, competing countries like United States or EU, you know, the interest deviation still
04:18remains to be fairly large, meaning that they do have a deeper pocket and more opportunities and flexibility and maneuverability
04:25to raise the rates.
04:27Whereas Bank of Japan do not have that luxury for several reasons.
04:31Firstly, their current account is already 600 trillion yen.
04:34They have worries about, you know, balance sheet worsening on themselves.
04:37And of course, you know, the economic revival may be cut off by, you know, increased rates.
04:44You know, these are the factors that they're so afraid of.
04:47And for that reason, it's very difficult for Bank of Japan to make that maneuverability that, you know, for example,
04:53the Fed or the ECB has.
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