Japan's Inflation has hit its highest levels in 40 years, marked by prices jumping up more than 3.5 percent in the year to October. Apart from that, October data also shows that the yearly jump in energy costs in Japan has been over 15%, so the Bank of Japan's action is vital.

Prices rose in Japan, driven mainly by its weakened Yen, their national currency. And this was exacerbated by the condition in Japan, which experienced rising raw material prices, especially in terms of raw materials, energy, and then global supply constraints.

And this month also marked seven consecutive months of Inflation nationwide, which missed the target of the Bank of Japan. The Bank of Japan is targeting Inflation below 2%, but until October, this did not improve again. Instead, food items increased to 88%.

The Central Bank also said on Tuesday that this inflation figure was shown by the Bank of Japan's governing body, reiterating their interest rates at the near-zero level. Monetary stimulus is considered one of the primary keys to raising the value of the Yen.

Japanese Inflation Hits 40-Year High in the Same Month When Japan's Economy Shrinks for the First Time in a Year

The Bank of Japan is now required to maintain its monetary stimulus to support the Yen's value increase. The condition where the BoJ is still keeping the series of cost-push episodes is also expected to fade away before this affects the next fiscal year to the cost of wages.

This 3.6% increase also puts the Japanese economy at the fastest pace of Inflation since 1982. In reaction to the data, chief cabinet secretary Hirokazu Matsuno said that officials would take steps to protect people's livelihoods from these price rises.

Previously, the Japanese government said they would spend up to 260 billion USD on an economic stimulus package, including support for energy bills, which have been increasing since Russia invaded Ukraine, and these funds are relief prices.

On the other hand, Matsuno said there would be an extra budget as soon as possible. And what we have now is that the central bank will tackle Inflation while maintaining its ultra-low levels rate. Is there no sign of monetary policy tightening at this point?

However, what makes the Bank of Japan appear still quite confident is that Japan was previously able to keep its economy from shrinking. In October, this a sign for the first time in a year in the third quarter that Japan's economy shrank; it has not happened before.

Global slowdown and soaring Inflation made the Yen slide to the worst level for decades. Meanwhile, Japan's three main pillars, namely in the consumption, capital expenditure, and export sectors, did not show anything fragile, so it was a booster for its economy.

BoJ Governor Kuroda Shares His Thoughts Regarding Japanese Inflation in 2023

The fall of the Bank of Japan is strongly associated with the market's contraction. Global risk and capital economics indicate that quarter-on-quarter, steady growth will occur, and a global downturn will weigh on exports and business investment, especially in 2023.

BoJgovernmer said that for the time being, they would be keeping a closing tab on financial markets from overseas. Higher commodity prices will make the Yen weaker. And even as the nation has broadened of price hikes by companies.

"At present, the Bank of Jaan demands that it should continue with monetary easing and thereby firmly support economic activity. By doing so, it aims to provide a favorable environment for firms to raise wages, which is a stable manner," he said.

Monetary tightening and abnormally one-sided appear to be taking a pause. Consumer prices also passed on rising import costs, and the economy likely grew in the last quarter. The Bank of Japan's chief said that the economy would get help to escape the 40-year high trap.