Inflation in Japan is well below the inflation rates in Germany or the USA.
(Photo: dpa)
Dusseldorf Japanese core inflation rose by 3.7 percent in November compared to the same month last year, the Japanese Interior Ministry announced on Friday. That was roughly in line with economists’ expectations.
The core inflation rate, which does not include the volatile prices for fresh food, has risen faster than at any time since 1981. In October it had climbed 3.6 percent. The biggest inflation drivers were the prices for processed food, and energy prices also rose sharply.
The so-called “Core-Core Index”, which excludes both fresh food and energy prices, rose by 2.8 percent in November compared to the same month last year.
The Asian stock exchanges were in the red after the data was announced: The Japanese Nikkei index fell by one percent to 26,235 points on Friday. The broader Topix index fell 0.5 percent to 1,898 points. The yen depreciated slightly and was last at 0.0075 US dollars.
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Inflation in Japan is well below the rate of inflation in Germany or the USA, but still well above the two percent target set by the Japanese central bank, as in the past few months. The Bank of Japan believes that price stability will be achieved in the medium term if inflation reaches two percent.
Fears of further tightening of monetary policy
The latest data could put further pressure on the Bank of Japan to adjust monetary policy to adjust. “The data fueled fears that further monetary tightening will be needed in 2023 to cool inflation,” said Tony Sycamore, market analyst at brokerage IG.
Only on Tuesday did the central bank surprise the markets with a change of strategy and decided to loosen the range of long-term bond yields. In concrete terms, this means that the central bank will in future allow the yield on ten-year government bonds to fluctuate by 0.50 percentage points around the target value of zero percent instead of the previous 0.25 percentage points. The central bank also announced that it would increase its monthly purchases of government bonds.
This was taken on the markets as a possible signal of an initial tightening of monetary policy. Until then, the Bank of Japan had always emphasized that it wanted to maintain its strategy of extremely loose monetary policy.
The head of the Japanese central bank, Haruhiko Kuroda, said on Tuesday that he was expecting price increases to slow down in the coming year.
More: Japan’s central bank shocks the markets with a change of course