By Noriyuki Suzuki,
Japan's core consumer prices leaped 3.0 percent in September, marking the sharpest gain in over 31 years, as a faltering yen inflated a range of import costs from energy to food, government data showed Friday, complicating the Bank of Japan's commitment to monetary easing.
The nationwide core consumer price index excluding volatile fresh food items remained above the BOJ's 2 percent target for the sixth straight month, and economists expect it to rise further toward year-end.
The headline figure marked the largest year-on-year increase since August 1991, if the effects of a series of consumption tax hikes are excluded. When the tax increases are factored in, the key gauge of inflation saw its biggest gain since September 2014, according to the Ministry of Internal Affairs and Communications.
"Price hikes are broadening and the weak yen effect is seen in a wider range of items such as durable goods," said Toru Suehiro, chief economist at Daiwa Securities Co.
"Consumers cannot stop buying food and other everyday items so what they do is to cut back their spending on services such as entertainment, which could be a blow to the service sector that needs to recover from the COVID-19 fallout," Suehiro added.
In fresh evidence of broadening price hikes in Japan, core CPI rose for the 13th straight month on a year-on-year basis as Russia's war against Ukraine sent crude oil, raw material and grain prices sharply higher while at the same time the yen continued its slide against the U.S. dollar.
Prices of food other than perishables gained 4.6 percent, the largest increase since 1981, weighing on consumer sentiment, the ministry data showed.
Energy prices jumped 16.9 percent, with electricity and city gas, which track crude oil and natural gas prices with a lag of a few months, rising at a faster pace than gasoline and kerosene.
Amplified by the weaker yen, higher raw material and transportation costs lifted prices of durable goods such as air conditioners by 11.3 percent.
Cost-push inflation, or price hikes caused by rising imports of commodities and other items, has been persistent in Japan despite the BOJ's view that core CPI will likely undershoot its 2 percent target in the next fiscal year.
That position has enabled the BOJ to remain firmly committed to its ultralow rate policy, at the expense of a further slide in the yen that has increased import costs even more.
Many economists expect the rise in core CPI will continue but peak before the end of this year. That is partly because of the fading effects of sharp cuts in mobile communication fees offered by major carriers in response to government pressure in 2021.
The cuts weighed on core CPI for months but the impact is expected to fall out of the data in October, a ministry official said, meaning that core CPI will be calculated from a higher base figure.
As inflation has become a concern for consumers, Prime Minister Fumio Kishida's government has been limiting the rise in retail gasoline and kerosene prices via subsidies to wholesalers, and managing the price of imported wheat.
The government is preparing another economic package to reduce the burden on households of rising utility bills amid faltering public support for the Cabinet.
So-called core-core CPI, which excludes both energy and fresh food, rose 1.8 percent for the sixth straight month of increase.
Related coverage:
Yen breaches key 150 line vs. dollar, new 32-year low
Japan dangles threat of "decisive" steps as yen slips past 150
Japan logs record 11.01 tril. yen trade deficit in fiscal 1st half
