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HomeEconomyJapan's consumer inflation hits near 8-year high in August

Japan's consumer inflation hits near 8-year high in August

Leika Kihara and Takahiko Wada

TOKYO (Reuters) – Japan’s core consumer inflation rose to 2.8 percent in August, the fastest pace in nearly eight years, data showed on Tuesday.

While core consumer inflation has surpassed the central bank’s 2% target for five consecutive months, the Bank of Japan (BOJ) is unlikely to raise interest rates as long as wages and consumption Growth is still weak, and interest rates will be raised immediately.

The data underscores the dilemma the Bank of Japan faces as it tries to prop up a fragile economy by maintaining ultra-low interest rates. That, in turn, contributed to an unpopular devaluation of the yen, which pushed up the cost of living for households.

The national core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, rose slightly above the median market forecast of 2.7%, following July After an increase of 2.4%. This was the fastest gain since October 2014.

The so-called “core core” index, which excludes fresh food and energy costs, rose 1.6 y/y in August, the fastest annual pace since 2015.

The core core index is closely watched by the Federal Reserve Bank of Japan as a gauge of how much inflationary pressures are driven by domestic demand.

Headline inflation hit 3.0% in August, the highest level since 1991, underscoring that distressed consumers are suffering from the rising cost of living.

“Headline inflation jumped to another high since 1991 in August and still has some more time to climb. That Capital Economics Japan Economist Darren Tay said the Bank of Japan will continue to firmly maintain its ultra-loose monetary policy. A headache for Japanese policymakers as it hurts retailers

The world’s third-largest economy grew at an annualized rate of 3.5% in the second quarter, stronger than initial estimates. However, due to COVID-19 infections, supply constraints and higher raw material costs Pressure on consumption and output, which has recovered more slowly than many other countries.

While inflation remains tame compared to many other developed countries, a slowing global economy and high energy prices dampen the outlook Overcast. The Bank of Japan has pledged to keep interest rates ultra-low and to remain abnormal amid a wave of global monetary policy tightening.

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