Japan c.bankers debated rising inflationary pressure at Dec meeting – summary

TOKYO — Bank of Japan policymakers discussed recent rising inflationary pressures that could force them to alter their view the country remained vulnerable to the risk of deflation, a summary of opinions at their December meeting showed on Monday.

While consumer inflation remains stuck around zero, prices may gradually accelerate reflecting rising energy costs, one of the BOJ’s nine board members was quoted as saying.

“As wholesale prices rise at a record pace reflecting higher commodity costs, consumer inflation is gradually facing upward pressure,” according to another opinion in the summary.

Some board members also pointed to changes in companies’ inflation outlook and price-setting behavior, with more firms passing on higher costs to consumers, the summary showed.

“In the next quarterly report due in January, it’s necessary to examine whether the current assessment – that risks to prices are skewed to the downside – remains appropriate,” one member was quoted as saying at the Dec. 16-17 policy meeting.

The opinions highlight a growing view within the BOJ board that rising global inflation is starting to spread in Japan, and could lead to an upgrade in the BOJ’s price forecasts at next month’s rate review.

At the Jan. 17-18 meeting, the BOJ will conduct a quarterly review of its growth and inflation forecasts. In current projections, the BOJ expects core consumer inflation to hit 0% in the current fiscal year ending in March, followed by a 0.9% rise in fiscal 2022 and 1.0% increase in fiscal 2023.

Japan has not been immune to global commodity inflation, with wholesale prices rising a record 9.0% in November.

But consumer inflation is stuck around zero, as firms remain cautious about passing on costs to consumers on concerns that households may hold back on spending.

The core consumer price index (CPI), which excludes volatile fresh food but includes oil costs, rose 0.5% in November from a year earlier, marked the biggest rise in nearly two years on surging fuel costs.

With inflation staying distant from its 2% target, however, the BOJ has stressed its readiness to keep monetary policy ultra-loose even as other major central banks start to dial back crisis-mode policies.

(Reporting by Leika Kihara; Editing by Sam Holmes)