Monitoring Desk
ISLAMABAD/TOKYO: Japan’s inflation rate has surged to a 41-year high as businesses pass on higher costs to their customers, according to official data.
Core consumer prices for last month in the world’s third-biggest economy rose by 4% from a year earlier, double the Bank of Japan’s (BOJ) target level.
It has further increased the pressure on the central bank to increase its interest rates to help against the rising cost of living.
Japan’s central bank sticks to low-interest rate
This week the BOJ surprised investors by announcing to keep the rates near zero, despite the increasing cost of all commodities from food to fuel.
“Producer prices have been rising at a much faster rate than consumer prices for some time, but now companies are passing these costs on to consumers,” Damian Thong, who heads Japan equity research at Macquarie Group, told the BBC.
“We believe that the BOJ will [eventually] end its negative interest rate policy,” he added.
Producer prices are an assessment of inflation at a wholesale level, while consumer prices indicate how much do households pay for goods and services.
The recent rise in the country’s inflation is the sharpest since 1981. It is the ninth month in a row that it has remained above the central bank’s 2% target.
Even after the severe price jump, Japan’s inflation rate is still among the lowest in the world.
As a result, the world’s third-largest economy has not conformed to the international trend of many other countries raising interest rates.
Many experts had expected the country’s central bank to withdraw its economic stimulus programme to tackle rising prices gradually.
The latest official figures showed the US inflation rate stood at 6.5% last month, while it was 9.2% in the eurozone and 10.5% in the UK.
