TOKYO (Reuters) – High raw material and fuel prices combined with a historic depreciation of the yen are expected to boost the consumer price index (excluding fresh food and core CPI) to 3.3% in January next year. out. Although the growth rate is expected to shrink next year due to the disappearance of the contribution of the rise in energy prices, some analysts say that the rise in the 2% range will continue until the April-June quarter.
Haruhiko Kuroda, governor of the Bank of Japan, has emphasized the continuation of monetary easing to support the economy. However, some economists who analyze the Bank of Japan’s policy say that if prices continue to rise by over 2% for more than one year, “Kuroda has fully fulfilled its role in easing Kuroda’s policy.” There is also a tendency to predict
September’s core CPI year-on-year growth rate increased by 0.2 percentage points from the previous month’s 2.8%. Excluding the consumption tax rate hike, it was the first time in 31 years since August 1991 that it reached the 3% mark. Food, excluding fresh food, and durable household goods were the main drivers, with food, excluding fresh food, rising 4.6% since August 1981 and household durable goods rising 11.3%, the first since March 1975. became the growth rate.
Coming here, the rate of increase in durable goods for household use has also increased, and room air conditioners rose by 14.4% in September. Consumer electronics have a high import ratio due to the historical appreciation of the yen in the early 2010s, which caused manufacturers to move their production bases overseas. There are characteristics that are easily reflected.
Core CPI is likely to increase further in the future. UBS Securities expects it to rise to 3.3% in January next year. Tsuyoshi Kurihara, deputy chief economist at UBS Securities, said, “Crude oil prices have certainly stabilized recently, but the impact of the weaker yen will be reflected with a lag, so price hikes led by the weaker yen will continue, mainly for goods.” We expect price increases to continue through the first quarter of next year.
In the foreign exchange market, the yen depreciated rapidly from the 115 yen level to the dollar in February this year, reaching 150 yen on October 20. Saisuke Sakai, chief economist at Mizuho Research & Technologies, estimates that a 30.4% depreciation of the yen during this period will have the effect of boosting CPI by 0.52 percentage points.
However, the growth rate of core CPI is expected to shrink in the next year as the positive effect of energy prices gradually wears off. UBS Securities forecasts 2.4% in the April-June quarter, 1.5% in the July-September quarter and 1.1% in the October-December quarter.
At the Diet session this week, Bank of Japan Governor Kuroda said that while the growth rate of consumer prices may increase toward the end of the year due to higher resource prices and a weaker yen, the supply-side push-up factors will wear off, and he expects prices to fall below 2% from next fiscal year onwards. ” he repeatedly emphasized.
At a press conference held in Toyama City on the 19th, Seiji Adachi, a member of the Bank of Japan’s Policy Board, said that while prices are rising faster than expected, he has said that he will not sell items such as food and energy, which are likely to be affected by the commodity market, as “overseas. “When downside risks, especially in the economy, become greater, there is the possibility of a decline,” he said.
From the perspective of achieving the price target of 2 percent, Adachi said that it would be desirable for service prices, which are slow to move and are not easily influenced by economic fluctuations, to rise a little more in preparation for a decline in the prices of goods that are easily affected by commodity prices. In September CPI, service prices were up only 0.2%.
Wage trends hold the key to predicting the future of service prices.
Regarding next year’s spring labor offensive, the RENGO confirmed on the 20th that it will aim for a wage increase rate of around 5%, including regular pay raises. This figure greatly exceeds this year’s record of 2.07%.
Mr. Sakai of Mizuho Research & Technologies forecasts that next year’s spring labor offensive will exceed 2.3% for the first time since 2015 against the backdrop of a recovery in corporate earnings and a tightening labor market. Although he may be better than expected, he does not expect a significant 4-5% wage hike that would affect monetary policy.
Core CPI growth hit 3% in September, surpassing the BOJ’s target of 2% for the sixth straight month. If the 2% level continues until next April-June, it will take more than a year to achieve the target.
Mari Iwashita, chief market economist at Daiwa Securities, a watcher of the Bank of Japan, said, “If the core CPI stays above 2% for a year, we’re no longer in deflation. Kuroda has fully fulfilled his role in alleviating the situation.”
Regarding the slowdown in the U.S. economy, which could have a negative impact on prices and the spring labor offensive, Iwashita does not expect a deep negative growth next year. If we can confirm that, a virtuous cycle in which the underlying trend in prices will rise gradually is forming.”
Regarding the BOJ’s target of 2%, he said, “(In golf, when the ball is very close to the cup, the last shot is omitted.) I think it would be fine if it was an OK putt.” He expects a policy revision in July after he takes office.
(Edited by Takahiko Wada, Hiroshi Hashimoto)