Japan’s consumer prices rose four percent in December from a year earlier, a level not seen since December 1981, fuelled in part by higher energy bills, government data showed Friday.
The acceleration came after a 3.7 percent increase in prices in November, and the data from the internal affairs ministry showed inflation for the 2022 calendar year stood at 2.3 percent.
The figures were released days after the Bank of Japan again opted to leave its ultra-easy monetary policy intact, bucking the trend set by other central banks that have hiked rates to tackle rising prices.
The December figure was well below the still sky-high levels that have sparked concern in the United States, Britain and elsewhere, but it far exceeds the BoJ’s longstanding inflation goal of two percent.
Even excluding volatile fresh food and energy prices, the figure for December was three percent.
Rises in electricity and gas bills, as well as telecommunication fees and price hikes for a range of processed foods contributed to the December acceleration, the government data showed.
But the central bank has consistently said it believes the price increases seen over the last year are temporary and linked to exceptional events such as the war in Ukraine and spiking energy costs.
The BoJ is reluctant to end its easing programme without clear signs that price rises are likely to be sustained, including rising wages.
The spring season is the period when corporate Japan traditionally faces requests for wage increases, and the government has urged companies to hike persistently stagnant salaries.
– BoJ under pressure –
On Wednesday, the central bank said it expected inflation to hit 3.0 percent for fiscal 2022, up from the 2.9 percent it predicted in October.
But it forecast inflation of only 1.6 percent for the following year, rising to 1.8 percent for fiscal 2024.
“We are not at a point where we can foresee that the two percent target can be achieved in a stable and sustainable manner,” BoJ Governor Haruhiko Kuroda said Wednesday.
Still, the rise in prices for 2022 was the first in three years, and the bank has come under pressure to consider a shift in tack.
Last month, officials shocked the markets by widening the band in which they allow rates for 10-year government bonds to move.
They said the decision would “improve market functioning”, though the new level was immediately tested.
The persistent differences between the Japanese central bank and the US Federal Reserve, which aggressively hiked rates last year, has helped weaken the yen against the dollar.
Darren Tay, Japan economist at Capital Economics, said gas and electricity subsidies should start to bring down headline inflation, but that the central bank would stay under pressure to address rising prices.
“We are not anticipating a full abandonment of the yield curve control at the Bank’s April meeting,” he wrote, referring to the limits the institution has maintained on the fluctuations of rates for 10-year government bonds.
“But as the peak in underlying inflation will coincide with a recession both inside and outside Japan, we don’t expect the Bank of Japan to raise its policy rate.”