Japan's government has released its annual white paper on Friday, revealing that companies are now transferring cost increases from Middle East conflicts onto consumers at a faster rate than during the 2022 Ukraine war, which had driven up fuel costs.

The white paper additionally notes that inflation expectations for both businesses and households are accelerating. This aligns with the Bank of Japan's view that price pressures are becoming deeply entrenched in the nation, which has long struggled with deflation.

According to the report, "Corporate spending appetite remains strong, with investment plans surpassing historical averages for the second consecutive year," highlighting the economy's resilience against energy shocks triggered by conflicts.

However, the white paper cautions that it is necessary to "closely monitor" the extent to which the Middle East conflict could impact Japan's economy and its output gap.

This document was compiled by the Cabinet Office, which is overseen by Economy Minister Shunichi Kono, an official widely perceived as cautious regarding the Bank of Japan's interest rate hike plans.