Japan Inc. disagrees with BOJ’s view cost-push inflation will be temporary

Japanese companies expect inflation to stay around the central bank’s 2per cent target for years to come, a survey showed on Friday, disagreeing with Bank of Japan Governor Haruhiko Kuroda’s view that the recent cost-driven price rise will prove temporary.

The BOJ’s “tankan” quarterly survey showed firms expect inflation to hit 2.4per cent this year, up from 1.8per cent projected in the previous poll. They see inflation at 2.0per cent three years from now, also up from the March forecast of 1.6per cent.

Corporate inflation expectations five years ahead stood at 1.9per cent, the June tankan showed, up from 1.6per cent in the March survey, the survey showed, a sign companies expect inflationary pressure to persist and keep price growth around the BOJ’s 2 per cent target.

The poll on the inflation outlook, which usually draws little attention as analysts focus more on the tankan’s business sentiment indices, came as a surprise to many analysts.

It also marks an important change in Japan’s inflation expectations, which is among key factors the central bank scrutinises in determining whether its price target can be achieved on a sustained basis.

“This is amazing. It is a huge change,” said Nobuyasu Atago, a former BOJ official who is currently chief economist at Japan’s Ichiyoshi Securities.