Japan’s December consumer inflation hits a new 41-year high

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Japan’s core consumer prices rose 4.0% in December from a year earlier, doubling the central bank’s 2% target and hitting a new 41-year high, data showed on Friday, adding to signs that recent escalation of rising inflationary pressures.

The data is likely to keep alive market expectations that the Bank of Japan (BOJ) will soon end its yield control policy and allow interest rates to rise further, analysts say.

The rise in the core consumer price index (CPI), which excludes volatile fresh food but includes oil costs, was in line with mid-market forecasts and followed a gain annualized rate of 3.7% seen in November.

The annual increase in core CPI thus exceeded the BOJ’s 2% target for the ninth straight month.

“Inflationary pressures are rising somewhat, with price increases extending beyond those for food and fuel,” said Yoshiki Shinke, chief economist at the Dai-ichi Life Research Institute.

“Companies are less cautious about raising prices anymore. “We may see inflation stay above the BOJ’s 2% target well into the fall of this year,” he said.

Core CPI, which removes both fresh food and energy costs, was 3.0% higher in December than a year earlier, accelerating from a 2.8% gain seen in November.

The BOJ kept monetary policy ultra-tight on Wednesday but raised its inflation forecasts in new quarterly forecasts, as companies continued to pass on higher raw material costs to households.

Many market players expect the central bank to end yield curve control, a policy under which it will cap long-term interest rates around zero, when governor Haruhiko Kuroda’s second five-year term ends in April .

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