TOKYO, July 24 (Reuters) – 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, the government said in an annual white paper released on Friday.
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.
The white paper is compiled by the Cabinet Office, which is overseen by Economy Minister Minoru Kiuchi, who is seen as cautious of the BOJ’s rate-hike plans.
(Reporting by Leika Kihara; Editing by Jacqueline Wong)
