- TOKYO, Sept 20 – Japanese consumer core inflation accelerated to 2.8% in August, hitting its fastest annual pace in nearly eight years and exceeding the central bank’s 2% target for the fifth consecutive month. , by increasing pressure on commodity prices and the weakness of the yen.
The strength of August’s inflation reinforced growing suspicions among economists that price pressure will last longer than the Bank of Japan (BOJ) has been expecting, though many are still not expecting an immediate change in its ultra-loose policy.
On Thursday, the BOJ will wrap up a two-day monetary policy meeting in which analysts expect it to consider the fragility of the economic recovery in deciding to keep short-term and long-term interest rates near zero.
“The weakness of the yen is importing inflation to Japan. Core consumer inflation will exceed 3% in October,” said Takeshi Minami, chief economist at the Norinchukin Research Institute.
“Inflation could stay above 2% for a year or so. This could induce the Bank of Japan to change its view of prices,” he said.
The rise in the core consumer price index (CPI), which excludes volatile fresh foods but includes fuel costs, was slightly higher than the median market forecast of a 2.7% increase and followed a rise in the 2.4% in July.
The increase, the fastest since October 2014, was largely due to higher utility bills, higher food and grocery prices, and the fading effect on data from mobile phone rate cuts implemented last year.
Analysts expect core consumer inflation to top 3% in October, when many retailers are set to raise prices and the base effect of the 2021 mobile rate cuts will disappear from the calculation.
An index that strips out fresh food and energy costs, which the Bank of Japan closely monitors as a key gauge of the underlying strength of inflation, was 1.6% higher in August than a year earlier. marking its highest annual rate of increase since 2015.
The Bank of Japan’s monetary policy stance contrasts with expectations that the US Federal Reserve will implement an interest rate hike on Wednesday that will widen the spread with Japanese yields and possibly trigger a new wave of yen selling.