According to official data released on Friday, Japan’s core consumer prices increased 3.0 per cent year over year in September, the highest level since 2014 as households were hard-hit by the weakening yen and rising energy prices.
According to Reuters, the statistic raises inflation considerably above the Bank of Japan’s long-term 2.0 per cent target, even when volatile fresh food prices are excluded. The central bank’s claim that the present rises do not yet fulfil its criteria for persistent price growth is supported by the fact that the figure was only 1.8 per cent when energy costs were excluded.
The most recent data was in line with market forecasts, but when similar data was last seen, a VAT increase had artificially inflated prices. The rate of inflation in September was the highest in nearly 31 years, excluding years when tax increases had an impact on the rate.
“The bulk of the price increases at the moment are rises in raw material prices,” while service prices associated with wages have not seen meaningful increases, Taro Saito, an economist at NLI Research Institute, said in a note released before the data.
He projected that stabilising inflation in Japan will take longer time to achieve due to pay rises and rising service costs.
The BoJ believes the present price hikes are related to extraordinary occurrences like the conflict in Ukraine, whereas other central banks have chosen to raise interest rates to combat skyrocketing inflation.
It has persisted in its ultra-loose monetary policy and refrained from raising rates, claiming that the third-largest economy in the world has not yet attained the inflation target of 2.0 per cent that it believes is required to accelerate growth.
The yen has fallen, especially against the dollar, as a result of the widening gap between the bank’s policy and other rate increases. The yen dropped to 150 versus the dollar on Thursday, the lowest level since 1990.
