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Rise in Cost of Fuel Threatens to Disrupt Japan Economy

Johnathon Fox
10/18/2021 | UPDATED ON: 10/18/2021

Fumio Kishida, Japan Prime Minister has assured the country that they are taking notice of the recent precipitous rise in the cost of fuel. He also said order were being given to fuel producers to up their fuel production output to put an end to the rising scarcity

Cost of FuelContinual Increase in the Cost of Fuel

The cost of fuel has been increasing abruptly since August, as a result of the global upsurge in cost of fuel. This is due to speculations that a fall in the COVID incidences across the world and a revival in of many economies will lead to more demand. Definitely, the price hike in Japan also is due to an increase in demand as the impact of the Corona Virus Pandemic wears out in.

According to the ministry of Economy, Trade and Industry, the mean price of gasoline in Japan reached a seven year high last week at 162.10 yen per liter, which is an increase of 2.10 yen per liter from the 4th of October.


Effect of Fuel Increase on the Economy

This increase in the cost of fuel comes as a setback to household spending in Japan, at a period where it is anticipated that domestic travels will increase after the lifting up of COVID-19 restrictions early this month.

Households may be further affected by a proportional increase also in the average cost of kerosene due to the need for more heat as the year moves to the winter months. This price was at 1814 yen per 18 liters last Monday after increasing consecutively for 6 weeks.

Another aspect that stands to be affected by the hike in cost of fuel and gasoline is the cost of raw material for companies, this can definitely lead to a shortage in corporate gains.

Projection from the Oil Information Center is that the fuel price will continue to increase through next week at least. And that the hike in price will in turn affect retail costs.

Kishida told reporters after an emergency meeting which he called that they were closely following developments in the crude oil market as well as the its effects on the households and domestic industries. He promised to take major steps as he has instructed the ministers to speak and work with the right channels in increasing fuel output, and helping affected industries.

Cost of FuelEffect of the Increase in Fuel Cost on the Yen

The rise in cost of crude oil for the past weeks has raised apprehension also over rising inflation. It is also stirring fear and doubt over the Japan economy as well as the global economy.

The uncertainty and doubt surrounding inflation in the Japan economy is not put in check may have more negative effect on the Japanese Yen, making it drop as the year goes to an end.

Note: Forexschoolonline.com is not a financial advisor. Do your research before investing your funds in any financial asset or presented product or event. We are not responsible for your investing results.

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About Johnathon Fox

Johnathon is a Forex and Futures trader with over ten years trading experience who also acts as a mentor and coach to thousands and has written for some of the biggest finance and trading sites in the world.

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