Japanese inflation rose 0.5 per cent last month compared to the previous year, increasing at its fastest pace in almost two years for a second consecutive month as rising energy costs added to pressure on households.
The government said on Friday that consumer prices grew at the same rate as in November, the largest increase since February 2020 and the fourth consecutive monthly rise. The consumer price index excluded fresh food but covered energy costs, which rose 16.4 per cent.
The data were published just days after the Bank of Japan changed its view on inflation risk for the first time since 2014, revising its projection upward from 0.9 per cent to 1.1 per cent for the fiscal year starting in April.
The central bank did not change its ultra-loose monetary stance as inflation has remained below its 2 per cent target. But BoJ governor Haruhiko Kuroda told a press conference on Tuesday that the central bank would maintain a “close eye” on whether rising prices had a negative impact on incomes and households’ purchasing power.
But despite mounting concerns about inflationary pressures, analysts believed price constraints in Japan remained much weaker than elsewhere.
“With years of deflation, wages failing to rise and consumers unfamiliar with inflation, they are hypersensitive to rising prices. As supply constraints will ease in the second half of the year, prices in Japan are expected to rise only about 1 per cent for a while,” said Takuji Aida, chief economist at Okasan Securities.
Kazuma Maeda, an economist at Barclays Securities Japan, said inflation would probably remain below the BoJ’s 2 per cent threshold.
“We believe medium- and long-term inflation is unlikely to shift upward unless accompanied by a significant pick-up in inflation expectations and wages,” he said in a note.
Maeda added that underlying inflation, excluding energy costs, would continue to lack momentum, hovering at 0.5 to 1 per cent year on year because of structural factors.
The CPI for 2021 fell 0.2 per cent as prices started to rise sharply towards the end of the year, marking the second year in a row of decline.
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