Japan’s inflation rate remains high for the first time in two years, and the Bank of Japan flags price pressures

Tokyo — Japan’s core consumer prices rose 0.5% year-on-year in December, at the fastest pace for nearly two months and two consecutive months as a sign of increased inflationary pressures from rising fuel and raw material costs. It has risen.

The recent rise in inflation has attracted the attention of the Bank of Japan (BOJ) policy makers. Some said that businesses may be beginning to be more willing to pass on higher costs to consumers. ..

“Japan is unlikely to see wages soar like the United States, but both economic growth and inflation are very likely to exceed expectations,” he said.

The rise in the Core Consumer Price Index (CPI), which excludes volatile fresh food but includes energy costs, was slightly below market expectations of a 0.6% rise. According to government data, the 0.5% rise in November was the fastest rise since February 2020.

Nevertheless, this increase is unlikely to trigger the BOJ’s immediate withdrawal of monetary stimulus, with inflation still well below its target of 2%, primarily due to external factors rather than strong domestic demand.

However, some analysts expect consumer inflation to approach 2% when resistance to mobile phone fee cuts ends in April, so central banks are in a market of early withdrawal from ultra-easy policies. You will face the challenge of curbing speculation.

Creeping inflation may also hurt consumption when more people at home are overshadowing Japan’s fragile economic recovery prospects to keep the surge and safety in the case of Omicron’s new coronavirus variant. Hmm.

According to CPI data, electricity prices in December were 13.4% year-on-year, the fastest pace since 1981, in addition to a 22.4% surge in gasoline prices.

“There are signs of change in the pricing behavior of Japanese companies, which were said to have been cautious about raising prices for fear of a decline in sales,” the Bank of Japan said at a meeting in December. ..

Japan is unaffected by global commodity inflation, wholesale prices are rising at record paces, urging more companies to raise prices and already changing public perceptions that deflation will continue.

The Bank of Japan raised its price forecast on Tuesday, but said it would not rush to change its ultra-loose policy, given the view that recent cost-push inflation will be temporary.

Haruhiko Kuroda, the governor of the Bank of Japan, said he would focus on scrutinizing whether wages are sufficient to boost household purchasing power, raise prices and sustainably accelerate inflation.

However, it is unclear whether companies will listen to wage increases, as Prime Minister Fumio Kishida’s stubborn and high input costs are squeezing profits.

Some analysts are wondering if inflation will extend beyond fuel and commodity price-sensitive commodities.

After removing the effects of energy and volatile fresh food prices, CPI data showed that the index fell 0.7% year-on-year in December, falling for the ninth straight month.

“Some products, such as fuel and energy, can be raised relatively easily, but other products are difficult,” he said. “I don’t think prices will rise as much as in the US and Europe.”

Kentaro Komiya, Reika Kihara