Inflation Driven by Troublesome External Factors

According to the latest announcement from the Ministry of Internal Affairs and Communications, consumer prices nationwide in May rose 1.5% compared to the same month last year. This is the first increase in 15 years. Inflation is defined as a sustained rise in prices, and this significant increase, which marks the eighth consecutive month of rising prices,
recorded a 1.5% figure. There are various causes of inflation, such as demand-pull inflation, which occurs when the economy overheats and causes shortages due to excess demand, or cost-push inflation, triggered by significant wage increases or soaring raw material costs.
The current inflation is solely due to "external factors," which means that for a resource-poor country like Japan,
there is little that can be done. It's a troubling situation.

Japan: 100% Dependent on Imported Oil, 60% on Food

Crude oil is vital for both industry and our daily lives, yet we are entirely dependent on imports. It would not be an exaggeration to say that the Japanese economy is firmly in the grip of foreign powers. Crude oil prices have now surpassed $100 per barrel, with some predicting a rise to nearly $200 by the end of the year. Furthermore, with a food self-sufficiency rate below 40%, Japan relies on imports for over 60% of its food. Food prices are rising in tandem with oil and raw material costs, delivering a double blow to the Japanese economy. Domestic gasoline prices have also surpassed 180 yen per liter. It's no wonder the economy is sluggish. The outlook is undeniably bleak. With salaries and bonuses stagnant while prices climb due to external factors, only a sense of helplessness remains.

The Value of Money is Declining, Which is a Problem

Many people say, "That's why I want to make sure I have enough money. That's what I'm working so hard for." While this is an understandable sentiment, they are overlooking a crucial point: a lack of understanding about inflation. Money only has "value" and can only be considered "reliable" when it can be used at its appropriate worth. Even if a pile of banknotes is stacked high before you, in the event of severe inflation, the value of that money will plummet.

The first and second oil shocks serve as a prime example. During that period, prices rose by over 30% due to inflation, leading to what was known as "frenzied prices." In the spring of 1974, the wage increase rate reached a historic high of 32.9%, but real wages declined, and bankruptcies surged. Despite a wage increase of over 30%, did the lives of salaried workers improve and become easier? They must have been filled with bitter memories of anxious and difficult daily lives. Elderly individuals and those relying on interest income were placed in particularly tragic circumstances.

How is the Japanese Government Tackling Inflation?

In short, even if income increases, inflation makes life difficult and makes it impossible to plan for retirement. Inflation doesn't change the face value of savings; it only diminishes their worth. For reference, if the wage increase rate of 33% (actually 32.9%) in the spring of 1974, during the period of frenzied prices, were to continue annually, a young salaryman earning 200,000 yen per month would see his salary rise to 830,000 yen in five years, 3.46 million yen in ten years,
and 14.4 million yen in fifteen years. At a monthly salary of 14.4 million yen, a family going on a trip might have to carry their money in a backpack. For instance, a bowl of katsudon would cost 50,000 yen, a plate of curry rice 38,000 yen, and a cup of coffee 30,000 yen would become commonplace.
The reason inflation is called a synonym for anxiety and hardship is based on solid evidence. It should be clear by now that the notion of simply having a lot of money is too short-sighted.

Finally, to quell the current inflation driven by external factors, there seems to be no other option but to cooperate with other countries. Of course, it goes without saying that each of us must also make efforts to conserve energy. Frankly, I question whether the Japanese government possesses the diplomatic capability to exert strong influence internationally and whether we can count on countries that trust and cooperate with Japan. In any case, I hope this opportunity allows everyone to truly feel the terrifying nature of inflation.