s in their entirety.  For their part, governments have seen a need to react, though reluctantly, given that by now they thought their feet would be safely away from the fire. In Asia, they are generally eschewing draconian monetary tightening like that of governments in the West, instead favouring support for consumers. But such fiscal support is becoming increasingly fraught because so much money was borrowed by governments during 2020-21 that the cupboard is getting bare. Japan holds out Japan is an excellent case in point. Its latest Consumer Price Index (CPI) reading of 3 per cent in September may look decent but it hasn’t been this high since the early 1990s. The country’s Wholesale Price Index is up more than three times the pace of the CPI, at 9.7 per cent, so you can see how this has retailers worried. At the front lines are food retailers, which are passing on some, but not all, of the increased costs, fearing correctly that consumers will reduce purchases.  According to point-of-sale data collected by Nikkei from supermarkets and other food retailers for more than 200 products, food prices are rising faster than the official government CPI as wholesale increases for most products are passed quickly through to consumers. There do seem to be a few exceptions, such as processed meat, but these are unlikely to last much longer.  About 50 per cent of the increase in wholesale prices in Japan is due to depreciation of the yen, which has happened for several reasons, but a major one being that Japan has refused to follow the example of other developed countries and embark on an aggressive program of interest rate tightening. Japan’s government is too worried that it would murder the economy. So it has focused instead on supporting consumer incomes. Even so, unions are becoming restive and are set to demand a 5 per cent wage rise. As of 21 October, the government is planning a 20 trillion yen (US$135 billion) package to help households weather the inflation storm. The measures include reducing household electricity and gas bills, and extending subsidies for oil wholesalers to maintain gasoline and other fuel prices at artificially lower levels. The main opposition Constitutional Democratic Party has proposed a cash handout of 100,000 yen (US$680) per child aged 18 or younger. It also wants reductions or waivers for debts incurred by smaller companies during the pandemic. These spending initiatives – modest though they are – are much easier said than financed, since Japan is already saddled with massive government debt of approximately 230 per cent of the country’s annual gross domestic product (GDP). Thailand keeps the lid on Over in Southeast Asia, consumer price inflation is generally running substantially higher than in Japan. In Thailand, for example, the CPI is up 6.4 per cent year-on-year, but at the producer level, prices are up 10.5 per cent. In response, Thailand, like Japan, has focused on measures that will support consumers rather than tighten monetary screws. The government will extend a tax rebate on diesel fuel until 20 November and subsidise electricity bills of some users. These measures are limited compared to previous household fiscal support during the pandemic, reflecting the fact that the budget is tapped out. The Bank of Thailand is optimistic though, believing that retail price inflation across the board will come down by about half next year, but its forecasts (like those of many central banks around the world in the past two years) have become unreliably on the rose-tinted side.  Korea is largely in the same boat as Thailand with inflation likely to hang around in excess of 5 per cent for a while to come, but growing fiscal constraints are dictating a much more cautious approach to support for households. Singapore: the perils of an open economy Singapore’s latest CPI reading is 7.5 per cent year on year. Transportation prices are up 20.2 per cent, food up 6.4 per cent, food service up 6.5 per cent, clothing and footwear up 8.7 per cent. Singapore is much more at risk for inflation than some other countries because of its openness, meaning the substantial amount of its economic activity accounted for by international trade. So Singapore is extremely vulnerable to inflation imported from outside the country. To be sure, retail sales growth has been in double digits, but that is partly due to the price increases, partly due to coming off a low base in 2021, and partly due to the return of tourists. In August (the latest reported month at the time of writing), non-auto retail sales were up 16.2 per cent, while sales at food service establishments (restaurants, cafes, food courts) were up 40.2 per cent, department stores were up 42.8 per cent, and clothing and footwear 64.7 per cent.  Despite these numbers, the government is understandably worried. It has announced a new S$1.5 billion support package for Singaporean households, with assistance targeting lower- and middle-income groups that are feeling the pinch most. About 2.5 million Singaporeans will receive a cash handout of up to S$500 in December. And every household will get vouchers worth S$300 in January. Malaysia opts for handouts too On 8 October, Malaysia’s Finance Minister announced cash handouts of RM7.8 billion (US$1.6 billion) to help an estimated 8.7 million middle-income Malaysians take up the cudgel against cost-of-living pressures. This package includes a one-off payment of RM2,500 (US$525) to households with five or more children and monthly incomes of less than RM2,500. Lower-income households will receive an electricity bill subsidy of up to RM40. Beggaring thy neighbour. After the beginning of the war in Ukraine, a number of countries have attempted to increase the domestic supply and reduce prices of key food products by imposing export restrictions. So far, 21 countries have imposed 26 food export bans. These include Malaysia’s export ban on chickens and India’s ban on wheat exports. The countries in Asia most vulnerable to food export bans and therefore to inflation at the checkout are Singapore and Taiwan (both of which import more than 50 per cent of their food supply), Korea, Japan, Sri Lanka and Vietnam. Luckily, most of these export bans have been short-lived, but it is nonetheless a disturbing trend because food prices generally remain extremely elevated. In fact, although food prices globally fell for the sixth consecutive month in September, they are still a staggering 43 per cent above the average level of 2019. This food inflation is the direct result of two years of Covid countermeasures – lockdowns, port closures and forced quarantining of workers – and their associated supply chain disruptions from which the world has not recovered. The bottom line is that Asia – along with the rest of the world – is heading into a critical period where fiscal support for households will have to be more limited and unless cost pressures on retailers subside, everyone but the wealthy will be forced to cut back. It will begin with discretionary spending but spread to necessities as well, and the luckier retailers will be faced with some awkward decisions about how much of the costs to absorb and how much to pass through.