Inflation expectations of Japanese households hit highs for more than two years: Bank of Japan

Tokyo — Japanese household inflation expectations have risen to highs for more than two years. According to Tuesday’s quarterly survey, rising living costs are a sign that public perceptions of future price fluctuations are beginning to change.

This result gives some hope for the Bank of Japan’s efforts to push inflation to the 2% target by changing perceptions of sustained deflation with aggressive monetary easing.

However, analysts are wondering if the recent rise in inflation, primarily caused by rising fuel and raw material costs, can be sustained unless it is accompanied by rising wages.

According to the Bank of Japan survey from November 5th to December 1st, the percentage of households expecting prices to rise one year later increased from 68.2% in September to 78.8%, the highest since September 2019. Reached the standard.

80.8% of the total said they expect prices five years from now to rise from 78.1% in the previous survey to the highest level since December 2019.

The study is one of the data that the Bank of Japan is likely to scrutinize at its policy meeting next week to determine if rising input costs are affecting household inflation expectations.

Nearly nine years of ultra-easy policies have failed to bring inflation to the BOJ’s target, as slower wage growth put pressure on consumption and discouraged companies from raising prices.

The hope among the BOJ’s policy makers was to shock the public from the idea of ​​deflation with a large amount of monetary stimulus.

With rising global commodity prices, wholesale inflation reached a record high of 9.0% in November, but core consumer inflation was only 0.5%, partly due to the impact of the coronavirus pandemic on consumption. ..

Some analysts expect core consumer inflation to exceed 1.5% around April as the cuts from last year’s mobile phone price cuts gradually declined and past rises in oil costs pushed up electricity prices. increase.

Many BOJ policymakers believe that such a rise in inflation is unsustainable without a stable rise in wages, indicating that Japan’s deflationary sentiment is persistent.

Wage growth remains slow, as Japanese companies do not have to pull back workers at high salaries after sticking to the tradition of minimizing headcount reductions amid the economic downturn caused by last year’s pandemic.

Haruhiko Kuroda, the governor of the Bank of Japan, said the central bank will wait until 2% inflation is achieved, even though counterparts such as the Federal Reserve Board (FRB) are aiming to break out of crisis mode stimulus. He said he would keep monetary policy super slow.

Reika Kihara