Consumer prices in Japan’s capital Tokyo rose 3.6 percent in November from a year earlier, the fastest pace since 1982, due to a weaker yen and higher energy prices, government data showed on Nov. 25.
Tokyo’s Core Consumer Price Index (CPI), which excludes fresh food, surpassed the Bank of Japan’s (BOJ) target of 2% for the sixth consecutive month, indicating continued inflationary pressure, Kyodo News reported.
Growth exceeded the average market forecast by 3.5 and the 3.4 percent increase observed last month. Tokyo last experienced higher inflation in April 1982, when the core consumer price index was 4.2 percent higher than the previous year.
Of the components that make up the Tokyo CPI data, service prices rose 0.7% year-over-year in November after rising 0.8% year-on-year in October.
This is compared to a 7.7 percent jump in durable goods prices in November, which followed a 7.0 percent annual gain in October.
Similarly, the nationwide core consumer price index rose 3.6 percent in October, the highest level in 40 years. However, the Bank of Japan sees recent inflation as temporary and will improve in the next fiscal year.
“In terms of prices, the year-on-year CPI growth rate is forecast to decline to below 2 percent compared to fiscal year 2023,” Bank of Japan Governor Haruhiko Kuroda said in a November 18 statement.
According to Kyodo News, the increase was mainly driven by rising energy prices (24.4%) and food (6.7%), excluding perishables.
Kuroda has repeatedly said that for inflation to reach his target of 2 percent sustainably, wages must rise enough to offset rising commodity prices.
Slow wage growth has been one factor slowing Japan’s post-pandemic recovery. The world’s third-largest economy unexpectedly contracted 1.2 percent year-on-year in the third quarter, partly due to soft consumption.
The Bank of Japan continues its policy of easing monetary policy, despite the weakening of the yen against the backdrop of tightening global policy.
“The Bank will continue to ease monetary policy in an effort to firmly support the Japanese economy and thereby achieve the 2% price stability target in a sustainable and stable manner, accompanied by wage increases,” Kuroda said.
Mari Iwashita, chief market economist at Daiwa Securities, said the weak yen and rising food prices indicate that the core consumer price index could remain at the 2% level set by the Bank of Japan for most of next year.
“Price gains are widening and suggest a weak yen could keep inflation high next year,” Iwashita told Reuters.
Japanese Prime Minister Fumio Kishida said in October that his government would spend 71.6 trillion yen (about $485 billion) in stimulus to help households and businesses cope with inflationary measures.
The economic package is expected to increase Japan’s gross domestic product by 4.6 percent and lower consumer prices by 1.2 percent over the next year.
“We are targeting energy prices, which are a major driver of recent inflation, and are apparently holding prices back,” Kishida said at a press conference.
Reuters contributed to this report.