Japan’s Aug consumer inflation hits near 8-year high

Author of the article: Reuters Leika Kihara and Takahiko Wada TOKYO — Japan’s core consumer inflation quickened to 2.8% in August to hit the fastest annual pace in nearly eight years, data showed on Tuesday, a sign inflationary pressures from higher raw material costs and a weak yen were broadening. While core consumer inflation exceeded…
Japan’s Aug consumer inflation hits near 8-year high

Author of the article:

Reuters

Leika Kihara and Takahiko Wada

TOKYO — Japan’s core consumer inflation quickened to 2.8% in August to hit the fastest annual pace in nearly eight years, data showed on Tuesday, a sign inflationary pressures from higher raw material costs and a weak yen were broadening.

While core consumer inflation exceeded the central bank’s 2% target for five straight months, the Bank of Japan is unlikely to raise interest rates any time soon as wage and consumption growth remain weak, analysts say.

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The data highlights the dilemma the BOJ faces as it tries to underpin a fragile economy by maintaining ultra-low interest rates, which in turn is fueling an unwelcome slide in the yen that is driving up households’ cost of living.

The rise in the nationwide core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, was slightly bigger than a median market forecast for a 2.7% increase and followed a 2.4% gain in July.

Once welcomed for giving exports a boost, the yen’s weakness is becoming a headache for Japanese policymakers, because it hurts retailers and consumers by inflating the already rising prices of imported fuel and food.

The world’s third-largest economy expanded an annualized 3.5% in the second quarter, stronger than the preliminary estimate. But its recovery has been slower than many other countries as a resurgence in COVID-19 infections, supply constraints and rising raw material costs weighed on consumption and output.

While inflation is still modest compared with many other advanced nations, a global slowdown and high energy prices are clouding the outlook. The BOJ has pledged to keep interest rates ultra-low and remain an outlier in a global wave of monetary policy tightening. (Reporting by Leika Kihara and Takahiko Wada Editing by Kim Coghill & Shri Navaratnam)

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