Tokyo, 20 September, /AJMEDIA/
Japan’s core consumer prices surged 2.8 percent to a nearly eight-year high in August, in the latest sign of cost-push inflation accelerated by a weak yen to the detriment of consumers, government data showed Tuesday, heaping pressure on the dovish Bank of Japan.
The nationwide core consumer price index, which excludes volatile fresh food items, stayed above the BOJ’s 2 percent target for the fifth straight month, with the pace of increase accelerating from 2.4 percent in July.
The key index of Japanese inflation accelerated at a pace unseen since September 1991, when the effects of consumption tax hikes are excluded, according to the Ministry of Internal Affairs and Communications.
The BOJ has taken the view that the recent bout of inflation should only be temporary because it is mainly due to higher energy and raw material costs, going against the global trend of monetary tightening. Still, pressure will likely grow on the BOJ as economists expect the headline figure to top 3 percent this year.
The core CPI, which marked the steepest gain since 2.9 percent in October 2014 following a consumption tax hike from 5 to 8 percent in April that year, marked the 12th straight month of year-on-year growth.
“What is striking is the impact of the weaker yen is getting bigger and bigger, while we have seen food prices also rising,” said Yoshiki Shinke, senior executive economist at the Dai-ichi Life Research Institute.
The yen has been falling sharply against the U.S. dollar, reflecting the divergent policy paths of the BOJ and the U.S. Federal Reserve. Both central banks are scheduled to hold policy-settings meeting this week.
The weaker yen has inflated the costs of imported crude oil and other energy sources, raw materials and food items, threatening to dent consumer sentiment despite government efforts to ease the pain.
A growing number of Japanese companies appear to have been passing on higher costs to consumers by raising retail prices, a positive development for the BOJ as it has been struggling for years to accelerate consumer inflation toward its elusive 2 percent target.
Energy prices jumped 16.9 percent from a year earlier, with those for electricity gaining 21.5 percent as they track crude oil and natural gas prices with a lag. Kerosene prices increased 18.0 percent and gasoline gained 6.9 percent, both slowing from a month earlier. They would have risen higher without government subsidies to oil wholesalers to lower retail prices.
Food prices, excluding perishables, gained 4.1 percent, the largest increase in nearly eight years, with more price hikes in the offing in the coming months.
Prices for durable goods, such as refrigerators and air conditioners, were up 6.3 percent, reflecting higher raw material prices and transport costs.
Inflation is picking up pace at a much slower speed in Japan than in the United States and Europe. But Japanese consumers are sensitive to price hikes at a time when wages are not rising much, clouding the outlook for the Japanese economy as its recovery from the COVID-19 pandemic fallout has been relatively slow.
“Cost-push inflation will not last forever but rising prices are still negative for consumers,” Shinke said.
He expects the core CPI to rise by 3 percent from a year earlier in September or October, adding that uncertainty remains over any impact from the government’s envisaged discount program to spur tourism nationwide.
So-called core-core CPI, which excludes both energy and fresh food items, increased 1.6 percent, up for the fifth straight month.
Part of the steep gain in the inflation figure came as the year-on-year effect of sharply lower mobile phone fees continued to dissipate, with the relevant figure down 14.4 percent from a year earlier. Major mobile carriers began offering cheaper plans in 2021 amid mounting government pressure.
