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Free AccessMNI BRIEF: BOJ Sees Inflation To Rise To Near 1% late 2021
Bank of Japan officials expect the consumer price index, excluding special factors, to rise to near 1% in late this year unless new factors, such as the Government's 'Go To" travel campaign, intervene to exert downward pressure, MNI understands.
The underlying inflation rate has been rising since late 2020, albeit slowly, moving at around +0.3% recently.
Bank officials believe that consumer prices will be pushed up by the base effect of comparing the rate with the previous year, when the CPI was pushed down by 0.4 percentage points due to the 'Go To' travel campaign.
Japan's consumer price index also will be boosted in or after September by the rise in utility charges caused by the past rise in the crude oil price.
Bank officials are focused on whether a higher consumer price index will increase the expected inflation rate, which rebounded from the fall forced by the pandemic last year, but their expected levels remain low.
The corporate inflation view in the latest Tankan survey rose in the wake of the rise in energy prices and hopes for vaccinations, but bank officials expect inflation expectations to remain subdued.
This is because a moderate recovery of private demand and a lingering deflationary mindset, preventing an upward acceleration in consumer prices.
Businesses are having difficulty in transferring high costs to retail prices amid weak demand, and the focus is on whether a recovery of consumer spending caused by the spread of vaccinations will enable firms to raise their prices.
Both short- and long-term inflation expectations at Japanese firms rose slightly in the three months to June, easing the BOJ's concern over the weaker corporate inflation view and lower growth expectations, the latest BOJ Tankan survey showed.
On average, companies saw the annual consumer inflation rate at 0.6% a year from now, up from 0.4% in March. They also saw a 0.9% rise three years out and a 1.1% rise five years ahead, up from +0.8% and +1.0% respectively in the March survey.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.