Tokyo inflation hits 4% for first time since 1982, spending dips

TOKYO’S inflation hit 4 per cent for the first time since 1982, with the accelerating price increases showing signs of denting household spending.

Consumer prices excluding fresh food climbed 4 per cent in the capital in December, according to the ministry of internal affairs on Tuesday (Jan 10). Economists had forecast a 3.8 per cent rise.

Both food and energy contributed to the acceleration. Processed food prices were up 7.5 per cent compared to the previous year.

The Tokyo figure is a leading indicator of the nationwide trend, and the quickening suggests the country’s price growth may also have accelerated in the final month of last year.

Prices in Tokyo have exceeded the Bank of Japan’s (BOJ) 2 per cent price target for seven months, but that likely won’t convince governor Haruhiko Kuroda that the trend will stick yet. The BOJ expects prices to cool below 2 per cent next fiscal year.

Kuroda has said the central bank will continue with monetary easing until Japan achieves its inflation goal on a sustainable basis, with accompanying wage growth.

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Still, the recent figure, at double the bank’s target, will likely prompt speculation over further policy shifts following the surprise tweaks to the yield curve control programme announced in December.

The BOJ is scheduled to hold its next policy meeting early next week.

A separate data report showed household spending declined for the first time in three months in November, indicating that the inflationary wave has likely begun to eat into household spending.

Sluggish wage growth has also likely cooled consumer sentiment, with earlier data showing Japanese workers’ real wages fell by the most since 2014 in November. BLOOMBERG