Asia Centric by Bloomberg Intelligence Takaichi's Growth Agenda Collides With BOJ Policy
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Nov 19, 2025 Taro Kimura, Japan's senior economist at Bloomberg Economics and former Bank of Japan staffer, shares insightful analysis on Japan's current economic landscape. He discusses the resurgence of inflation at nearly 3%, driven by food prices and the 2022 oil shock. Kimura explains how Prime Minister Sanae Takaichi's pro-growth policies might complicate the Bank of Japan's ability to manage inflation. He also touches on Takaichi’s controversial remarks about Taiwan and their geopolitical implications, all while examining the challenges and opportunities within Japan's fiscal strategy.
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Inflation Is Now Self-Reinforcing In Japan
- Japan has shifted from decades of near-zero inflation to persistent ~3% inflation driven by food, wages and expectations.
- Rising inflation expectations are self-reinforcing and make returning to 2% a challenge.
Corporate Price Moves Broke A Long-Standing Taboo
- Price rises began after the 2022 oil shock forced firms to pass costs to customers and broke a long taboo against raising prices.
- Wage growth and higher inflation expectations now support broader, stickier price increases.
Service Prices Signal Deeper Inflation
- Rents and many service prices are rising after long stagnation, reflecting entrenching inflation expectations.
- These second-round effects increase CPI persistence beyond initial commodity shocks.
