Inflation in Japan hits 30-year record

Japan’s core inflation reached 3% for the first time in over three decades excluding tax-hike impacts, yet the spike is unlikely to move the central bank away from its monetary easing stance.

Consumer prices excluding fresh food climbed 3% in September from a year ago, the internal affairs ministry reported on October 21, matching analysts’ forecast. It was the quickest pace since 1991, excluding the jump in 2014 when prices were impacted by a sales tax hike, Bloomberg reports.

While energy remained the biggest contributor to price rises from a year earlier, gains in processed food and household durable goods were behind the further acceleration in inflation.

Despite the extended stretch of price gains beyond its 2% goal, the Bank of Japan is expected to stick with its ultra-loose policy, cementing its isolated position in global central banking. Even with inflation spreading beyond energy prices, Governor Haruhiko Kuroda is likely to keep arguing that wages need to increase much more before the BOJ’s price-stability target is met.

The central bank’s insistence on sticking with rock-bottom interest rates further widens the policy gap between Japan and its global peers.

The Bank of Japan will reportedly raise the core consumer inflation forecast for the current year to the upper half of the 2% range. Still, Governor Kuroda continues to expect that price growth will weaken below 2% next fiscal year and onward.

The yen fell to a closely watched 150 per dollar level on October 20, keeping investors on high alert for possible intervention to support the currency.

Japan’s chief currency official Masato Kanda told reporters that excessive foreign exchange moves are becoming even more intolerable and that resources for intervention are limitless.