By Leika Kihara

TOKYO, Reuters – Japan must address any economic damage caused by rising prices recently, Shunichi Suzuki, the Finance Minister, said Wednesday. This is a signal that policymakers are facing new challenges as the impact on households and the high cost of living continues to be a problem.

Suzuki stated that the rise in recent prices is due to higher fuel prices around the world, and not an increase in import costs from weakening yen.

Suzuki said to parliament that prices rising before wages could lead to a drop in household income, and thereby affect consumer consumption. He said, “We have to respond to any effect such price movements could have on the economic.”

Suzuki was not specific about the steps that could be taken by government officials.

The comments were made in answer to a question by an opposition lawmaker about whether Bank of Japan’s ultra-loose policy and the resulting weak yen are to blame for raising household living costs.

Japan’s consumer inflation is still at 0.5%. This is well below the 2% goal set by Western countries and Japan. However, wages are barely increasing and the impact on households is becoming a hot political topic before an upper house election, likely in July.

This country is almost completely dependent on imported fuel. It makes its economy highly vulnerable to swings in oil prices. To ease household pressure from high fuel costs, the government has launched a temporary subsidy program and indicated the willingness to consider further steps.

The economy recovered in the last three months of 2021. However, analysts predict a contraction for the current quarter due to a rise in COVID-19 and higher prices.

BOJ Governor Haruhikokuroda repeatedly stated that a weakening yen is beneficial to the entire economy. He also dismissed the possibility of an immediate exit from the ultra-loose policy.