Tokyo (AFP) – Japanese inflation accelerated in January, further pressuring households as prices excluding fresh food rose 3.2 percent on-year, government data showed Friday. Speculation is growing that the Bank of Japan may hike interest rates again to counter rising prices and as part of its retreat from years of aggressive monetary easing to boost the moribund Japanese economy.
The core Consumer Price Index (CPI) was above market expectations of a 3.1 percent rise, and accelerated from 3.0 percent in December, the internal affairs ministry said. Overall, inflation including volatile fresh food prices was up 4.0 percent on-year, speeding up from 3.6 percent in December and 2.9 percent in November. In January, the price of cabbage almost tripled year-on-year after last year’s record summer heat and heavy rain ruined crops in what media have dubbed a “cabbage shock.” The price of rice also soared more than 70 percent, the data showed, while electricity bills jumped by 18 percent.
“While the increase in electricity and other prices narrowed, the increase for gasoline and kerosene expanded,” the ministry said. Last week, the government said it would release a fifth of its emergency rice stockpile after hot weather, poor harvests, and panic buying over a “megaquake” warning pushed up its cost. Japan has previously tapped into its reserves in disasters, but this was the first time since the stockpile was created in 1995 that supply chain problems have prompted the decision.
The Bank of Japan raised interest rates again last month — having done so in March for the first time in 17 years — and signalled more hikes to come. The move was underpinned by “steadily” rising wages and financial markets being “stable on the whole,” the bank said. Even as other central banks raised borrowing costs in recent years, the BoJ had remained an outlier. But it finally lifted rates above zero in March, signalling a move away from policies designed to counter Japan’s “lost decades” of economic stagnation and static or falling prices.
Recent gross domestic product (GDP) figures showed that Japan’s economic growth slowed sharply last year, although the rate for the fourth quarter topped expectations. It comes as companies fret over the impact of US President Donald Trump’s tariffs and other protectionist trade policies on the world’s fourth largest economy. Japanese media reported on Thursday that the trade minister is arranging a visit to the United States to seek exemptions from the tariffs.
© 2024 AFP
