Japanese companies are passing on rising costs from the Middle East conflict at a faster pace than in 2022, when the war in Ukraine pushed up fuel costs, Reuters reports, citing the government’s annual white paper.
Corporate and household inflation expectations are also accelerating, the white paper said, aligning with the Bank of Japan’s view that inflationary pressures are becoming embedded in a country once mired in deflation.
“Companies’ spending appetite remains strong with their investment plans exceeding the historical average for two straight years,” the white paper said, highlighting the economy’s resilience to the conflict-induced energy shock.
The white paper, however, warned that “close attention” was needed on the extent to which the Middle East conflict could hurt Japan’s economy and output gap.
