Surge in energy prices… Up to ¥15tn hit to Japan’s economy

Source

Korea Economic Daily

Summary

It reported that global energy price increases are estimated to have an adverse impact of up to ¥15tn on Japan’s economy.
It said that if imported resource prices rise 80%, costs would increase by about 2.3% of GDP, and consumer prices are projected to rise by 0.3 percentage points if international crude oil prices increase 10%.
It reported that household electricity bills will rise from April and that a sharp increase in household burdens is possible as fuel prices surge and LNG and coal prices rise.

Forecast Trend Report by Period

As import resource prices rise

Costs to increase by ¥9tn–¥15tn

A projection has emerged that the rise in global energy prices could inflict a negative impact of up to ¥15tn on Japan’s economy. If crude oil prices climb 10%, consumer prices are expected to rise by 0.3 percentage points.

According to The Nikkei on the 28th, Japan’s Cabinet Office announced the previous day an estimate that higher prices for imported resources would have an adverse impact of ¥9tn–¥15tn on the Japanese economy. The calculation says that if resource prices rise 50% year on year, the cost to Japan’s economy would be ¥9tn, an increase of about 1.4% of gross domestic product (GDP). If resource prices jump 80%, the cost would be ¥15tn, up roughly 2.3% of GDP.

The Cabinet Office also estimated the impact on inflation. It projected that if international crude oil prices rise 10%, consumer prices would increase by up to about 0.3 percentage points from a year earlier. On the economy, it said it is “recovering moderately, but it is necessary to closely monitor the impact of the situation in the Middle East.”

In Japan, household electricity bills will rise from April by around ¥400 from the previous month, based on average usage. This reflects the expiration of subsidies paid in January–March this year in response to winter heating demand. From June onward, a sharp rise in fuel prices due to a blockade of the Strait of Hormuz would also be reflected in electricity charges.

The Nikkei noted that “current fuel market prices, compared with the end of February, show crude oil at about double, liquefied natural gas (LNG) at about 1.8 times, and coal at about 1.2 times,” adding that household burdens could increase sharply in summer when cooling demand rises.

Reporter Kim Il-gyu black0419@hankyung.com