Japanese Government White Paper: Japanese companies are accelerating cost-shifting, and inflationary pressure is growing.

The annual white paper released by the Japanese government on Friday pointed out that, compared to the increase in fuel costs due to the 2022 Ukraine war, Japanese companies are transferring the cost increase caused by the Middle East conflict to consumers at a faster pace. The white paper stated that inflation expectations for businesses and households are also accelerating, which is consistent with the view of the Bank of Japan that inflation pressures are becoming entrenched in a country that was once deeply mired in deflation. The white paper noted, "Business expenditure intentions remain strong, and investment plans have exceeded historical averages for two consecutive years," highlighting the resilience of the Japanese economy in response to energy shocks caused by conflicts. However, the white paper warned that it is necessary to "closely monitor" to what extent the Middle East conflict may affect the Japanese economy and output gap. The white paper is prepared by the Cabinet Office, which is overseen by the Minister of Economy and Finance, Toshimitsu Motegi; it is believed that he is cautious about the Bank of Japan's plans to raise interest rates.