Japan inflation rate seen accelerating to over 41-year high

Japan’s core consumer prices likely accelerated to a more than 41-year high in January, a Reuters poll of 19 economists showed, reflecting companies’ will to raise prices while squeezing household purchasing power as wages lag cost-push inflation.

Nationwide consumer prices index (CPI) data by the internal affairs ministry, released at 0830 JST Feb. 24 (2330 GMT Feb. 23), could dash policymakers’ hope of achieving sustainable and stable inflation along with structural wage hikes, reports Reuters.

The core CPI is set to reach 4.2per cent in January versus the same month a year earlier, accelerating from December’s 4.0per cent, the poll showed.

December’s figure was double the Bank of Japan’s (BOJ) target, however the bank considers that rate as far from sustainable as it is mainly driven by the elevated cost of energy and commodities.

“Wholesale prices have likely peaked out reflecting adjustment in commodity markets and slowdown in import prices, with oil and coal products declining,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“However, the input and labour costs have not yet been fully passed on to final consumer goods and services, which will likely prod Japanese firms into raising prices this spring.”

Wholesale prices in January rose 9.5per cent from a year earlier across items as varied as food, steel and chemicals, data showed last Friday. Such a rate is likely to keep the central bank under pressure to phase out its economic stimulus programme.