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

  • Core CPI in Tokyo rose 3.6% in November vs f’cast +3.5%
  • Tokyo CPI remains above the BOJ’s 2% target for the sixth consecutive month
  • The data underscores widening inflationary pressures

TOKYO, Nov 25 (Reuters) – Core consumer prices in Japan’s 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 percent target for a sixth straight month, signaling a broadening of inflation. pressure.

The increase, driven mainly by food and fuel bills but spreading to a wider range of goods, cast doubt on the Bank of Japan’s (BOJ) view that recent cost-push inflation would 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 earlier, government data showed on Friday. Growth beat the market’s median forecast of 3.5% and the 3.4% increase seen in October

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

While the growth was mainly driven by electricity bills and food prices, companies also charged more for durable goods as the weak only boosted import prices, the data showed.

“Price growth is widening and suggests a weak yen could keep inflation high into next year,” said Mari Iwashita, chief market economist at Daiwa Securities.

“Core consumer inflation may stick around the BOJ’s 2% target for most of next year, which would make it harder for the bank to argue that price rises are temporary.”

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

THE OUTLIER FIGHT

The BOJ kept interest rates ultra-low on the view that inflation will slow back below its target next year as support from rising fuel prices fades. The central bank therefore stayed out of the wave of monetary policy 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 in Japan remains muted.

Of the components that make up 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 to November’s 7.7% increase in durable goods prices, which followed October’s 7.0% year-on-year 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 gain recorded in September.

BOJ Governor Haruhiko Kuroda has repeatedly said that if inflation is to sustainably reach its 2% inflation target, wages must rise enough to match 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% 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. National data for November is due to be released on December 23.

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

Our standards: Thomson Reuters Trust Principles.

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