Intellia East Asia News – Japan’s September consumer inflation accelerates 3%, fastest in 31 years

Japan’s core consumer prices jumped 3.0% in September, marking the biggest rise in more than 31 years, as a faltering yen inflated a range of import costs from energy to food, government data showed on Friday, complicating the Bank of Japan’s commitment to monetary easing.

The national core consumer price index excluding volatile fresh food remained above the BOJ’s 2% target for the sixth month in a row, and economists expect it to continue to rise. increase towards the end of the year.

The headline figure marked the biggest year-on-year increase since August 1991, excluding the effects of a series of consumption tax hikes. When tax increases are taken into account, the key indicator of inflation registered its largest increase since September 2014, according to the Ministry of Interior and Communications.

“The price increases are spreading and the weak yen effect is being felt across a wider range of items such as durable goods,” said Toru Suehiro, chief economist at Daiwa Securities Co.

“Consumers can’t stop buying food and other everyday items, so what they’re doing is reducing their spending on services like entertainment, which could be a hit. to the service sector which needs to recover from the fallout of COVID-19,” Suehiro added.

In further evidence of widening price increases in Japan, the core CPI rose for the 13th straight month on an annual basis as Russia’s war on Ukraine drove up crude oil prices , raw materials and cereals up sharply while at the same time the yen continued to slide against the US dollar.

Food prices other than perishables rose 4.6%, the biggest increase since 1981, weighing on consumer sentiment, ministry data showed.

Energy prices jumped 16.9%, with electricity and town gas, which track crude oil and natural gas prices with a lag of a few months, rising at a faster rate than the gasoline and kerosene.

Amplified by the weaker yen, rising raw material and transportation costs drove up the prices of durable goods such as air conditioners by 11.3%.

Cost inflation, or price increases caused by rising imports of raw materials and other items, has persisted in Japan despite the BOJ’s view that core CPI is likely to be lower than its target of 2% over the next fiscal year.

This position allowed the BOJ to remain firmly committed to its ultra-low rate policy, at the cost of a further decline in the yen which further increased import costs.

Many economists expect the rise in core CPI to continue but peak before the end of this year. This is partly due to the dampened effects of the steep reductions in mobile communication charges proposed by major operators in response to government pressure in 2021.

The cuts have weighed on the core CPI for months, but the impact is expected to fade from the data in October, a ministry official said, meaning the core CPI will be calculated from a figure of higher base.

As inflation became a concern for consumers, Prime Minister Fumio Kishida’s government limited the rise in retail gasoline and kerosene prices through subsidies to wholesalers and managed the price of imported wheat.

The government is preparing another economic package to reduce the burden on households of rising utility bills amid faltering public support for Cabinet.

The so-called core-core CPI, which excludes both energy and fresh food, rose 1.8% for the sixth consecutive month of increases.

Category: Japan

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