Japan shifting to wage-driven inflation phase, finance minister says

• Japan's finance minister sees the economy shifting to wage-driven inflation.
• Government plans consumption tax cuts and payouts to offset rising living costs.
• Finance minister stated no divergence between government and Bank of Japan views on inflation.

Japan's economy is nearing a transition to sustained inflation driven by rising wages, according to Finance Minister Satsuki Katayama. She stated on Wednesday that current price increases are largely due to higher import costs. Katayama addressed parliament, explaining that planned government measures, including consumption tax cuts and household payouts, are designed to mitigate the impact of rising living expenses. She affirmed alignment between the government and the Bank of Japan in their strategies to combat inflation, despite potential conflicts between fiscal stimulus and monetary tightening. The Bank of Japan recently raised its interest rates to 1.25%, a 31-year high, amid concerns that energy shocks and a weaker yen could push inflation above its 2% target. Analysts have cautioned that tax cuts could stimulate demand, potentially contradicting the central bank's efforts.