Japan’s Inflation Grows to 4%, The Highes in Forty Years

Japan’s Consumer prices, excluding volatile fresh food prices, rose 4% from a year earlier in December, the fastest pace since December 1981 Japan’s Consumer prices, excluding volatile fresh food prices, rose 4% from a year earlier in December, the fastest pace since December 1981 and double the BOJ’s inflation target; government data showed Friday. Overall prices, including fresh food, also rose 4%, the first time that figure reached 4% since 1991.

Japan’s Inflation

BOJ Gov. Haruhiko Kuroda has repeatedly said that Japan doesn’t yet have sustainable inflation because recent price increases are caused mainly by the higher energy cost. He has been striving for demand-led inflation, in which healthy consumer demand drives corporate investment in a virtuous cycle, as reported to WSJ Print Edition.

Nonetheless, some analysts believe that inflation has been high enough for long enough that Mr. Kuroda’s assessment no longer holds. Consumer-price inflation exceeded the BOJ’s 2% target for nine months.

“Because it is already 4% and has been above 2% for quite a long time, it has become difficult to say this is just transitory,” said Mitsubishi UFJ Morgan Stanley Securities strategist Naomi Muguruma.

There also are signs that Japan’s Inflation continues to grow. Consumer prices, excluding fresh food and energy, rose 3.0% from a year earlier in December, higher than November’s 2.8% increase.

The Bank of Japan’s policy board projected Wednesday that inflation would fall below 2% in the year ending March 2024.

Mizuho Securities economist Yasunari Ueno agreed with the BOJ’s view. He said Japan’s inflation isn’t sustainable and is different from the U.S., given that services prices rose only 0.8% in Japan in December. In the U.S., services prices excluding energy services rose 7% in December.