Japan’s core inflation hit a new 41-year high in January as businesses passed on rising costs to households, official data showed on Friday, keeping the country’s central bank under pressure to gradually scale back its massive stimulus program.
The data underscore the dilemma monetary leaders face in the face of soaring fuel and staple prices, affecting households, many of which have yet to see their wages rise enough to offset the rising cost of living.
Japan’s core consumer price index (CPI) at the national level, which excludes volatile fresh food prices but includes energy costs, was 4.2% higher in January than a year earlier, matching the median market forecast and accelerating the 4.0% annual rise recorded in December.
January’s rise was the fastest since September 1981, when the cost of fuel soared due to the fuel crisis. petroleum in the Middle East that affected the Japanese economy, so dependent on imports.
Core inflation has exceeded the Bank of Japan’s 2% target for nine consecutive months, mainly due to the persistent rise in fuel and commodity prices.
“Inflation is likely to peak in January, but may not fall back below the Bank of Japan’s 2% target for some time,” said Yoshimasa Maruyama, chief economist at SMBC Nikko Securities.
“But there are doubts about whether the rise in inflation will be sustainable, as it remains largely driven by the cost of food and fuel.”
The incoming governor of the Bank of Japan, Kazuo Ueda, faces the challenge of maintaining monetary policy of controlling sovereign yields, which has been attacked by markets that bet that high inflation will force the central bank to raise interest rates.