(Bloomberg) — Tokyo’s inflation hit 4% for the first time since 1982, with the accelerating price increases showing signs of denting household spending.
(Bloomberg) — Tokyo’s inflation hit 4% for the first time since 1982, with the accelerating price increases showing signs of denting household spending.
Consumer prices excluding fresh food climbed 4% in the capital in December, according to the ministry of internal affairs Tuesday. Economists had forecast a 3.8% rise.
Both food and energy contributed to the acceleration. Processed food prices were up 7.5% compared to the previous year.
The Tokyo figure is a leading indicator of the nationwide trend, and the quickening suggests the country’s price growth may also have accelerated in the final month of last year.
Prices in Tokyo have exceeded the Bank of Japan’s 2% price target for seven months, but that likely won’t convince Governor Haruhiko Kuroda that the trend will stick yet. The BOJ expects prices to cool below 2% next fiscal year.
Kuroda has said the central bank will continue with monetary easing until Japan achieves its inflation goal on a sustainable basis, with accompanying wage growth.
Still, the recent figure, at double the bank’s target, will likely prompt speculation over further policy shifts following the surprise tweaks to the yield curve control program announced in December.
The BOJ is scheduled to hold its next policy meeting early next week.
A separate data report showed household spending declined for the first time in three months in November, indicating that the inflationary wave has likely begun to eat into household spending.
Sluggish wage growth has also likely cooled consumer sentiment, with earlier data showing Japanese workers’ real wages fell by the most since 2014 in November.
What Bloomberg Economics Says…
“Looking ahead, we see core inflation slowing to around 2.6% in 1Q23 from 3.6% in 4Q22. Subsidies starting in January to support discounts on electricity and gas bills could reduce core CPI inflation by as much as 0.8 percentage point in 1Q. The recent appreciation in the yen, albeit from a low base, may help to limit price gains on imports.”
— The Asia economists team
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(Updates with more details from the report)
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