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2011年1月24日 (月)


--The Asahi Shimbun, Jan. 22
EDITORIAL: Rising food and oil prices

The prices of cereals and crude oil are soaring. These commodities directly affect ordinary people's lives, and their rising cost is threatening to disrupt both the Japanese and the global economies, which are already on a shaky footing.

The prices of wheat, soybeans and corn have reached their highest levels in two and a half years. Oil futures prices in the U.S. crude market have surpassed 90 dollars per barrel, their highest point since the collapse of U.S. investment bank Lehman Brothers in the autumn of 2008 triggered a global financial crisis.

The upswing in cereal prices was triggered by supply worries caused mainly by poor weather in Australia, Russia and Latin America, but there are also some structural factors behind the trend. The world population is projected to increase by 2 billion in the next four decades. That rapid growth, combined with economic expansion in emerging countries, is certain to cause an explosive increase in the demand for food.

Global monetary easing is also adding fuel the commodity price fire. In particular, large-scale quantitative easing by the United States is driving up food and oil prices by causing large amounts of money to flow into commodity markets.

The current situation is similar to 2008, when famine caused by disruption to food imports sparked riots in many poor countries. There should be no repeat of such social unrest.

Industrial countries are also beset by problems. Three years ago, Japan found itself facing a toxic mixture of a general decline in prices but inflation in food and energy prices. Troubling signs of this malady are beginning to be seen in the United States and Europe.

In such circumstances, retail sales weaken and income remains stagnant, while the prices of the daily essentials of food and energy keep rising. This situation is especially hard for people with low incomes and undermines economic stability.

The problem is that it is hard to find an effective fiscal or monetary policy remedy for the disease. The U.S. exemplifies the problem.

Last autumn, the U.S. Federal Reserve embarked on a drastic program of quantitative easing, which chiefly involved buying securities as a way of getting more dollars into the economy. The aim was to prevent the nation's economy from falling into a deflationary downturn.

The Fed's strategy has worked to some extent, but it has also led to rises in gas prices. The consequences of the policy are now dampening America's economic recovery.

Global excess liquidity is raising concern about the creation of economic bubbles in emerging countries. Monetary authorities in Japan, the United States and Europe should be aware that excessive monetary easing can cause serious evils. Emerging countries, for their part, should be more attentive to the risks of economic growth at breakneck speed.

The economies of industrial and emerging countries appear to be getting increasingly interdependent. Both camps keep an eye on developments that have huge implications for the world economy and should step up their efforts at policy coordination.

Unfortunately, there is no miracle cure for the problem of surging food and oil prices. The only plausible approach is for countries to keep making serious but low-profile efforts to increase domestic cereal production and stockpiles; to promote wider use of renewable energy sources, which also help slow global warming; and to move carefully toward increasing nuclear power generation.


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