Japan’s inflation rate has increased to a new 41-year high as businesses pass on rising costs to their customers. In the previous month, core consumer prices climbed by 4% from a year ago, which is twice the Bank of Japan’s (BOJ) target. In an effort to combat the rising cost of living, it puts more pressure on the central bank to raise interest rates. The BOJ increased the interest rate on its 10-year government bonds from 0.25% to 0.5% despite rising prices for everything from food to gasoline. As a result, the Japanese yen’s value has increased significantly, rising to 151 yen to the dollar for the first time since 1990.

Producer prices measure inflation at the wholesale level, whereas consumer prices represent what households actually pay for products and services. According to official data released on Friday, January 20, inflation surpassed the central bank’s target of 2% for the ninth straight month. This was its highest level since 1981. However, Japan still has one of the lowest inflation rates in the world, even after the price hike. The country defied the trend of the other G7 countries, which gradually increased interest rates to control rapidly rising costs.