Japan’s inflation rate continues to exceed predictions, prompting an intense watch on the Bank of Japan’s policy meeting next week — its first one with newly appointed head Kazuo Ueda.
The Internal Affairs Ministry reported on Friday that consumer prices, excluding fresh food, had risen 3.1% in March compared to the same month last year. This was the same rate as seen in February and slightly exceeded economists’ expectations of a 3% rise.
The price index which does not take into account the prices of energy and fresh food items reached its highest point in almost four decades, coming in at 3.8%. This is much higher than what was imagined initially.
The indicator, which is taken as an indication of underlying price trends, was surprisingly robust compared to other large economies, despite the relatively small figures.
The Bank of Japan (BOJ) recently announced that inflation is expected to dip below 2% this year. Even with this decrease, the BOJ still believes its ultraloose monetary policy is justified as the predetermined inflation target has not been met in a reliable fashion. This is an opinion echoed by the new BOJ Governor, Haruhiko Ueda since he took office earlier this month.
Despite the Bank of Japan’s (BOJ) 2% inflation target being surpassed for twelve straight months, there is still debate about whether the central bank will reverse its stimulus measures in the near future. The recent change of power has also stirred up market discussions concerning possible modifications.
The price of processed food rose 8.2% in 2021, the biggest surge since 1976. This was the primary factor driving prices up. A Teikoku Databank report has revealed that more than 20,000 items including seaweed and noodles are expected to increase in price significantly by July 2021. This is at a much faster rate than the year before. Prime Minister Fumio Kishida’s government has taken steps to maintain prices, even though its ultimate goal is to induce inflation. This is done in order to avoid public discontent, as well as sustain consumer spending.