TOKYO: Japanese households’ inflation expectations held steady in the three months to June, a Bank of Japan survey showed on Monday (Jul 14), a sign the country was making progress in durably achieving the central bank’s 2 per cent inflation target.
While the survey adds to recent growing evidence that companies are shedding their long-held aversion to price hikes, lingering uncertainty over US trade policy will likely keep the BOJ from raising interest rates in the near future, analysts say.
As many as 85.1 per cent of households expect prices to rise a year from now, the June survey showed, compared with 86.7 per cent three months ago.
Of the total households surveyed between May 1 and Jun 3, 83.1 per cent expect prices to rise five years from now, down slightly from 83.5 per cent in March.
Households expect prices to rise by an average 12.8 per cent a year from now, up from 12.2 per cent in March and hitting the highest level since September 2006, the survey showed.
The figures highlight changing public perceptions on future price moves in once deflation-prone Japan, as companies continue to pass on rising raw material costs through price hikes.
The BOJ last year exited a decade-long, massive stimulus and raised interest rates to 0.5 per cent in January on the view Japan was on the cusp of durably hitting its 2 per cent inflation target.
While consumer inflation has remained above the BOJ’s 2 per cent target for three years, the central bank’s view is that underlying inflation – or price moves driven by strength in domestic demand and backed by solid wage growth – should move closer to 2 per cent to contemplate further rate hikes.
The BOJ has also said households’ inflation expectations are among key factors it looks at in determining whether underlying inflation is on track to durably hit 2 per cent.
The BOJ will consider revising up this month its inflation forecast for the current fiscal year, reflecting persistent rises in rice and broader food costs, sources have told Reuters.
