Japan’s inflation hits near 8-year high, stays above BOJ’s target

Japan’s core consumer inflation quickened to 2.8% in August, hitting its fastest annual pace in nearly eight years and exceeding the central bank’s 2% target for a fifth straight month as price pressure from raw materials and yen weakness broadened, Reuters reported.
The strength of August inflation reinforced growing suspicions among economists that price pressure will last longer than the Bank of Japan (BOJ) has been expecting, though many still expect no immediate change to its ultra-easy policy.
The BOJ will on Thursday end a two-day policy meeting at which analysts expect it to consider the fragility of economic recovery in deciding to hold both short- and long-term interest rates near zero.
“The weak yen is importing inflation into Japan. Core consumer inflation is set to top 3% in October,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“Inflation may stay above 2% for another year or so. That could prod the BOJ to change the way it looks at prices,” he said.
The rise in the core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, was slightly bigger than a median market forecast for a 2.7% increase and followed a 2.4% gain in July.
The increase, the fastest since October 2014, was due largely to higher utility bills, rising food and grocery goods prices, and the fading effect on the data from cuts to mobile phone charges implemented last year.
Analysts expect core consumer inflation to exceed 3% in October, when many retailers plan to raise prices and the base effect of more 2021 cellphone fee cuts will drop out of the calculation.