Consumer inflation in Japan’s capital rises at fastest pace in 40 years

  • Core CPI in Tokyo rose 3.6% in November compared to f’cast +3.5%
  • Tokyo CPI remains above the BOJ’s 2% target for the 6th consecutive month
  • The data underline the growing inflationary pressure

TOKYO, Nov 25 (Reuters) – Core consumer prices in the Japanese capital, a leading indicator of national trends, rose at their fastest annual pace in 40 years in November and exceeded the central bank’s 2% target for a sixth straight month, signaling rising inflation. pressure.

The rise, driven mainly 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 transitory, some analysts said.

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

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

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

“Price hikes are widening and suggest a weak yen could keep inflation high next year,” said Mari Iwashita, chief market economist at Daiwa Securities.

“Core consumer inflation may remain around the BOJ’s 2% target for much of next year, making it difficult for the bank to argue that the price rise is temporary.”

Tokyo’s core CPI index, which excludes fuel and fresh food, was 2.5% higher in November than a year earlier, up from a 2.2% annual increase seen in October.

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OUTLIER FIGHT

The BoJ kept interest rates at ultra-low levels as inflation eases back below its target next year as fuel price rises dissipate. The central bank therefore remained on the sidelines of a wave of monetary tightening around the world aimed at combating soaring inflation.

Unlike the experience of some Western economies, where wages have risen sharply with inflation, growth in wages and service prices remains muted in Japan.

Among the components of Tokyo’s CPI data, service prices rose just 0.7% year-on-year in November, following a 0.8% year-on-year rise in October. That compares with a 7.7% increase in durable goods prices in November, which followed October’s 7.0% annual increase.

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

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BOJ Governor Haruhiko Kuroda has repeatedly said that for inflation to sustainably reach his 2 percent inflation target, wages must rise enough to offset rising commodity prices.

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

CPI data in Tokyo raises the prospect of further growth in the nation’s core consumer prices, which were 3.6% higher in October than a year earlier, also a 40-year high. The publication of national data for November is scheduled for December 23.

Reports from Takahiko Wada and Leika Kihara; Editing by Sam Holmes and Bradley Perrett

Our standards: Thomson Reuters Trust Principles.

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