MNI BRIEF: Business Inflation Expectations Rise: BOJ Tankan

Bank of Japan officials have been heartened by rising inflation expectations among corporate executives, which may pave the way for firms to raise wages next spring, the BOJ September Tankan showed on Monday.

Both short- and medium-term inflation expectations at Japanese firms rose in the three months March, endorsing the BOJ’s view that inflation expectations are rising and firms are more positive about raising retail prices.

On average, companies saw the annual consumer inflation rate at a record high of 2.6% a year from now, up from 2.4% in June. They also saw a record high rise of 2.1% rise in three years and a record high 2.0% gain five years ahead, compared with +2.0% and +1.9%, respectively in the June survey.

The results were consistent with the latest view that inflation expectations have risen moderately and support the BOJ's assessment of corporate price setting behaviour.

The BOJ sees Japan’s core inflation rate rising close to 3% in the coming months but the Bank doesn’t expect the price rise to be sustainable without considerable wage hikes.