Japan core consumer inflation seen hitting 20-month high as price pass-through spread: Reuters poll

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FILE PHOTO: A woman looks at items outside an outlet store at a shopping district in Tokyo

By Kantaro Komiya

TOKYO – Japan’s inflation likely rose in November at the fastest pace in 20 months as more companies started to transfer rising raw material costs fuelled by the weak yen to consumers, a Reuters poll showed on Friday.

The data will show increasing price pressures on the economy while the Bank of Japan (BOJ) announced no change to its ultra-loose monetary policy except for phasing out emergency pandemic-funding in a two-day rate review concluded on Friday.

Japan’s core consumer price index likely gained 0.4% in November from a year earlier, according to the poll of 18 economists.

It would mark the biggest acceleration since March 2020 and follow a 0.1% rise in October.

Analysts said the combination of the weak yen and soaring raw material costs would force companies to raise prices, including in consumer-facing sectors.

“Many manufacturers used to avoid price hikes by carrying on (rationalisation) efforts,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“But now, passing input costs to output prices is becoming a trend.”

While consumer inflation had remained near-zero, Japan’s wholesale price index rose 9.0% in November, the fastest rate since comparable data became available in 1981, pushing firms to pass costs onto retail prices.

BOJ Governor Haruhiko Kuroda said on Wednesday consumer inflation may approach the central bank’s 2% target given recent raw material cost pressures, but he persisted in keeping monetary policy ultra-loose to achieve a sustainable recovery from the pandemic.

Separate government data is expected to show housing starts rose 7.1% in November from a year earlier, which would mark the ninth straight month of year-on-year increase, following a 10.4% advance in October.

The government will release consumer price data at 8:30 a.m. on Dec. 24 (2330 GMT, Dec. 23). Housing starts data is due at 2:00 p.m. (0500 GMT) on Dec. 24.

(Reporting by Kantaro Komiya; Editing by Stephen Coates)