Consumer Inflation Accelerates to a 40-Year High in Japan

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Core consumer inflation accelerated in Japan to a 40-year high in October, driven by currency weakness and imported cost pressures. The nationwide core consumer price index (CPI) was up 3.6% on a year earlier, exceeding the 3.5% rise expected by economists and the 3.0% gain seen in September.

Japan's core consumer inflation accelerated to a 40-year high in October, driven by currency weakness and imported cost pressures that the central bank shrugs off as it sticks to a policy of ultra-low interest rates.

 

The nationwide core consumer price index (CPI) was up 3.6% on a year earlier, exceeding the 3.5% rise expected by economists and the 3.0% gain seen in September.

 

It was the largest jump since February 1982, when a Middle East crisis stemming from the Iran-Iraq war disrupted crude oil supply and triggered a spike in energy prices.

 

The rise in the index, which excludes volatile fresh food prices but includes oil products, confirmed that inflation remained above the 2% goal of the Bank of Japan (BOJ) for a seventh consecutive month.

 

But economists do not expect the BOJ to join a global trend of raising interest rates, because it sees this year's acceleration in inflation as a cost-push episode that will fade as import costs stop pushing.

 

Foreign supply constraints have driven up prices of imported food, industrial commodities and manufacturing parts, and so has a fall in the yen, which in dollar terms is down more than 20% this year.

 

"I haven't changed my view that the rise will start to slow down soon," said Takeshi Minami, chief economist at Norinchukin Research Institute, noting declines in global grain prices. "I expect inflation to peak by year-end and the rise in prices to start diminishing in the new year."