Consumer prices in Japan jumped last month by the most in more than 41 years, the Japanese government reported yesterday, adding to pressure on the central bank to adjust its longstanding ultra-lax monetary policy.
The key price indicator, which excludes volatile fresh foods, rose 4.2 percent last month, but some analysts expected it to be slightly higher.
Excluding energy prices, inflation rose at a 3.2 percent annual rate.
Photo: Bloomberg
That news came as the nominee to become governor of the Bank of Japan (BOJ), Kazuo Ueda, told lawmakers that the central bank’s strategy was “appropriate,” and that its near-zero benchmark interest rate should continue “to solidly support the economy.”
Ueda is expected to succeed BOJ Governor Haruhiko Kuroda, who engineered the policy, when his second five-year term ends in April. The nomination requires parliamentary approval.
The BOJ’s monetary policy was designed to fight off deflation, and Japan’s inflation rate has stayed relatively low compared with the US and Europe.
“Time is needed before the effects of monetary policy kick in,” Ueda told the Japanese parliament, adding that the price rises are peaking.
The change of leadership at the central bank has drawn global attention, with speculation that Ueda might unwind the monetary easing that Kuroda installed almost a decade ago.
However, he countered such expectations, saying that the policy stance is needed to achieve stable consumer prices and rising wages.
He also stressed that the BOJ was cooperating closely with central banks around the world and international monetary officials.
Ueda was previously a BOJ policy board member, but has a mostly academic background. He would need to maneuver through challenging times.
Although overall inflation in Japan remains subdued, surging prices for oil, gas and other commodities have fed into prices for many consumer goods, utility rates and other costs.
The last time the core consumer price index rose as much as last month was in September 1981, the Statistics Bureau of Japan said.
At the time, oil prices had soared in the late 1970s in what was dubbed the “oil shock.”
Under Kuroda, the central bank set a target price rise of 2 percent, but prices have risen at a faster pace in recent months. Manufacturers and food outlets have been announcing price rises, one after the other.
More time is needed to see that price increases are stable, Ueda said.
The change of BOJ leadership could signal a shift from the “Abenomics” economic policies of late Japanese prime minister Shinzo Abe, economics analyst Haruhiko Sato said.
“The markets are feeling a trifle unsettled in anticipation of a shift in policy, even if it were to come gradually,” he said in a recent report.
Wage increases generally have not kept pace with inflation, adding to hardships for some households at a time when the Japanese yen has weakened against the US dollar and other currencies. That boosts the purchasing prices of imports, including energy and food.
Japan avoided slipping into recession late last year, eking out a 0.6 percent annual pace of growth from October to December, following a contraction in the previous quarter.
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