Consumer inflation in Japan’s capital is rising at its fastest pace in 40 years

  • Tokyo Nov core CPI 3.6% higher than f’cast +3.5%
  • Tokyo CPI remains above BOJ’s 2% target for the 6th consecutive month
  • Data underscore rising inflationary pressures

TOKYO, Nov 25 (Reuters) – Core consumer prices in Japan’s capital, a leading indicator of nationwide trends, rose in November at the fastest annual rate in 40 years, surpassing the central bank’s 2% target for the sixth consecutive month , indicating rising inflation. pressure.

The rise, mainly driven by food and fuel bills but spreading to a wider range of goods, casts doubt on the Bank of Japan’s (BOJ) view that recent cost inflation will prove to be transient, some analysts said.

Tokyo’s core consumer price index (CPI), which excludes fresh food but includes fuel, was 3.6% higher in November than a year earlier, government data showed on Friday. The increase beat an average market forecast of 3.5% and the increase of 3.4% in October

The last time inflation was faster in Tokyo was in April 1982, when core CPI was 4.2% higher than a year earlier.

While the increase was mainly driven by electricity bills and food prices, companies also charged more for durable goods as the weak yen drove up import costs, the data showed.

“Price increases are accelerating and suggest that the weak yen could keep inflation high well into next year,” said Mari Iwashita, chief market economist at Daiwa Securities.

“Consumer inflation could remain around the BOJ’s 2% target for most of next year, which would make it difficult for the bank to continue to argue that price increases are temporary.”

Tokyo’s core-core CPI index, which excludes both fuel and fresh food, was up 2.5% year-on-year in November, up from annual gains of 2.2% in October.

BOJ AN OUTLIER

The BOJ has kept interest rates ultra-low on the belief that inflation will slow below its target next year when the rise in fuel prices fades. The central bank has therefore remained an outlier in a wave of monetary tightening around the world aimed at combating skyrocketing inflation.

Contrary to the experience of some Western economies, where wages have risen with inflation, Japan’s wage and service price growth remains subdued.

Of the components that make up Tokyo CPI data, services prices were only 0.7% higher in November than a year earlier, following an annual increase of 0.8% in October. That compares to a 7.7% spike in durable goods prices in November, which followed October’s annual gain of 7.0%.

Separate data released by the BOJ on Friday showed that the business services price index, which measures the prices companies charge each other for services, was 1.8% higher in October than a year earlier. That was slower than an annual gain of 2.1% in September.

BOJ Governor Haruhiko Kuroda has repeatedly said that for inflation to sustainably reach its inflation target of 2%, wages must rise enough to offset the rise in commodity prices.

Slow wage growth was one of the factors slowing Japan’s recovery from the coronavirus pandemic. The world’s third-largest economy unexpectedly shrank by 1.2% year-on-year in the third quarter, partly due to weak consumption.

Tokyo CPI data raises the likelihood of further increases in core consumer prices nationwide, which were 3.6% higher in October than a year earlier, another 40-year high. The nationwide data for November is scheduled to be released on December 23.

Reporting by Takahiko Wada and Leika Kihara; Edited by Sam Holmes and Bradley Perrett

Our Standards: The Thomson Reuters Principles of Trust.

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