Inflation is the rate at which the general price level rises, reducing what your money can buy.
Inflation Across Asia
Asian countries have very different inflation profiles:
| Country | Typical CPI | Central Bank Target |
| Japan | 0-3% | 2% (struggling to reach) |
| China | 1-3% | ~3% |
| India | 4-7% | 4% ±2% |
| Indonesia | 3-6% | 3% ±1% |
Japan's Unique Case
Japan fought deflation (falling prices) for decades. The Bank of Japan kept interest rates at zero or negative to stimulate inflation — the opposite of most central banks.
Impact on Markets
- Rising inflation → central banks raise rates → stocks usually fall short-term
- Falling inflation → rates may be cut → stocks usually rally
- Hyperinflation → currency collapses → stocks may rise in nominal terms but economy suffers