The policy mix for Japan is utterly baffling. It has tried to stoke inflation for years and it continues to with ZIRP and QE despite higher global inflation.
So instead of letting customers pay the price of fuel, it brings it down with subsidies. And because it’s being brought down, the government is forced to intervene to strengthen the currency.
That’s three branches of government working for opposite ends. The latest report said the subsidies will last until at least March and could be sustained beyond April. Furthermore, subsidies for utility bills could also be extended beyond the year-end deadline.
The BOJ is due out with new inflation forecasts at the meeting on Oct 31.