Japan’s core consumer inflation rate in November rewritten a new high since December 1981, showing that companies continued to pass on rising costs to ordinary households, resulting in a wider spread of rising prices. The market speculates that this may mean that the Bank of Japan (the central bank) may be getting closer to the “turn” stage of monetary policy.
Japan’s Ministry of Internal Affairs and Communications announced on Friday (23rd) that the annual growth rate of the core consumer price index (CPI) in November was 3.7%, in line with market expectations, slightly higher than the 3.6% in October, and surpassed the Bank of Japan’s for the eighth consecutive month. 2% target. This data excludes the price of fresh food but includes the price of energy. In November, it was mainly affected by the increase in the price of processed food. However, thanks to the government’s travel subsidies and other measures, the increase did not exceed 4%.
Core CPI, which excludes fresh food and energy prices, also rose 2.8 percent from a year earlier, up from 2.5 percent in October. The indicator, which mainly shows demand-driven inflation, is closely watched by the Bank of Japan, with the latest data showing that inflationary pressures in Japan are not only building but might continue into next year.
The Bank of Japan will next announce its monetary decision and latest economic forecast on January 18, a report that may provide material for the Bank of Japan to scrutinize carefully. Most analysts expect the BOJ to revise its forecast for consumer inflation by then.
The Bank of Japan adjusted the yield curve control (YCC) policy on Tuesday, allowing long-term interest rates to rise as high as 0.5%, making the market interpret that it may be a prelude to Japan’s withdrawal from its ultra-loose monetary policy. As the term of Bank of Japan President Haruhiko Kuroda will end in April next year, the market has long speculated that the policy trend will change soon. However, Kuroda emphasized on the same day that the Bank of Japan has no intention to withdraw monetary stimulus at this stage, because the inflation rate may still slow down to below 2% next year.
“A policy change might happen next spring when a new BOJ chief takes office and wage negotiations come to an end,” said Koya Miyamae, senior economist at SMBC Nikko Securities.
However, he pointed out that the market has not completely ruled out the possibility of an early policy shift, especially considering that Kuroda has a record of 180-degree changes in his position.
The report might also influence the government’s stance on prices. It is rumored that Japanese Prime Minister Fumio Kishida plans to rethink the 10-year agreement with the central bank, such as adding flexibility to the inflation target.
