TOKYO (Reuters) — Japan’s core consumer inflation hit a fresh four-decade high as companies continued to pass on rising costs to households, data showed, a sign price hikes were broadening and could keep the central bank under pressure to whittle down massive stimulus.
Months before Tuesday’s surprise tweak to its yield control policy, Bank of Japan (BOJ) policymakers had discussed the potential market impact of a future exit from ultra-low interest rates, minutes of their October meeting showed Friday.
While many retailers plan further hikes for food products next year, the outlook for inflation and the timing of any further BOJ policy tweaks are muddled by the risk of global recession and uncertainty over the pace of wage hikes, analysts say.
“The hurdle for policy normalization isn’t low. The global economy may worsen in the first half of next year, making it hard for the BOJ to take steps that can be interpreted as monetary tightening,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
Japan’s core consumer price index (CPI), which excludes volatile fresh food but includes energy costs, rose 3.7% in November from a year earlier, data showed Friday, matching market forecasts and perking up from a 3.6% gain in October.
It was the biggest rise since a 4.0% jump seen in December 1981, when inflation was still high from the impact of the 1979 oil shock and a booming economy.
Aside from utility bills, prices rose for a broad range of goods from fried chicken, smartphones to air conditioners, in a sign of mounting inflationary pressure, the data showed.
Many analysts expect core consumer inflation to slow back near the BOJ’s 2% target next year, as the base effect of past fuel price spikes dissipates and the impact of government subsidies to curb electricity prices take effect from February.
But an index stripping away such one-off factors may remain elevated and keep pressure on the BOJ to remain vigilant to the chance of a demand-driven rise in inflation.
The so-called “core-core” index, which excludes both fresh food and energy prices, rose 2.8% in November from a year earlier, accelerating from a 2.5% increase in October.