Japan’s inflation hit its fastest clip in 40 years in October, an outcome that puts the central bank in an even more awkward position as it tries to explain the need to stick with monetary stimulus to pursue stable price growth.
Consumer prices excluding fresh food climbed 3.6% in October from a year ago, with the acceleration driven by processed food and the fading impact of mobile phone fee cuts, the internal affairs ministry reported Friday.
The reading outpaced a 3.5% forecast by analysts and marks the fastest price growth since 1982.
Price gains have now exceeded the Bank of Japan’s 2% price target for seven straight months, though the result is unlikely to convince Governor Haruhiko Kuroda to change course. He’s consistently maintained that the current cost-push inflation is only temporary, and that the central bank’s ultra-loose policy is necessary to keep supporting Japan’s recovery from the pandemic.
The BOJ currently expects price growth to weaken below 2% next fiscal year starting in April.
The faster pace of inflation is at least partially due to the sharp drop in the yen. The wider trade deficit in October also reflected the negative hit from the weaker currency, while the embattled yen and a ballooning import bill also helped push Japan’s overall economy back into reverse in the third quarter.
The yen neared 152 per dollar at one point in October, hitting a fresh 32-year low. Japan’s government stepped into markets again during the month to prop up the currency.
What Bloomberg Economics Says…
“Looking ahead, we expect core inflation to hover around 3.5% in 4Q and slow to 2.8% in 1Q23. A weaker yen should buoy imported goods prices. New subsidies aimed at containing electricity prices starting in January are likely to slow core inflation in early 2023.”
This story has been published from a wire agency feed without modifications to the text.
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