Consumer prices in Japan are rising at the fastest rate in almost 2 years on fuel
A customer looks at stuffed animals on display at the Hamleys Toy Store at Yokohama World Porters Mall in Yokohama, Japan on Sunday, December 19, 2021.
Noriko Hayashi | Bloomberg | Getty Images
Consumer inflation in Japan in November marked the largest year-over-year increase in nearly two years on the back of soaring fuel costs, a sign that the fallout from global material price increases firsts are growing.
The increase, however, is unlikely to prompt the Bank of Japan (BOJ) to withdraw its monetary stimulus anytime soon, with inflation still far from the central bank’s 2% target, analysts say.
Data released on Friday highlights the new challenge facing policymakers to prevent rising costs of living from hurting already weak household spending and Japan’s fragile economic recovery.
BOJ Governor Haruhiko Kuroda said on Thursday that a weak yen could inflict greater pain on households than before by pushing up the prices of imported goods.
“Faced with price increases for a range of basic necessities, consumers may become even more cautious about increasing spending,” said Yasunari Ueno, chief market economist at Mizuho Securities.
Japan’s core consumer price index (CPI), which excludes volatile fresh food but includes oil costs, rose 0.5% in November from a year earlier, according to data from the government, beating a median market forecast for a gain of 0.4%.
This is the largest increase since February 2020 and follows a 0.1% increase in October.
This gain is attributable to a 15.6% increase in energy costs. Food costs also rose 1.4%, indicating that households faced higher grocery costs even when wage growth remained slow.
Core consumer inflation is already above 1% when you eliminate the impact of this year’s mobile phone fee cuts, which push the index down 1.5%, analysts said.
“We expect core inflation to accelerate to a peak of around + 1.0% next year as commodity inflation rises further and the drag from tariff cuts on cellphones disappears from the annual comparison, ”said Tom Learmouth, Japanese economist at Capital Economics.
Japan was not immune to global commodity inflation, as wholesale prices rose a record 9.0% in November from a year earlier.
But core consumer inflation has hovered around zero as businesses remain cautious about passing costs on to consumers, fearing that households will hold back spending.