TOKYO (Reuters) - Japan’s core consumer inflation held firm in August at the fastest rate in nearly five years, a Reuters poll showed, suggesting steady progress toward ending 15 years of nagging deflation.
Much of the gains in August are likely to come from high energy prices, which could cause some concern about the negative impact on households.
However, officials from the Bank of Japan have expressed confidence that prices will continue to rise and approach its 2 percent inflation goal due to a tight labor market and signs that companies are starting to raise wages.
Japan’s core consumer prices, which includes oil products but excludes prices of fresh food, rose 0.7 percent in August from a year earlier, according to a Reuters poll of 28 economists.
That would match the rise in the year to July, which was the fastest in almost five years. The Internal Affairs Ministry will release consumer price data on September 27.
“Gasoline prices have been rising due to gains in crude oil prices,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.
“There’s also a pass through of higher prices on food due to a weaker yen.”
BOJ Governor Haruhiko Kuroda emphasized that the central bank would not simply focus only on the inflation goal, but wanted to entrench expectations of sustained and ongoing price rises.
“Japan seeing 2 percent inflation just temporarily isn’t enough. That level needs to be sustained stably. That means long-term inflation expectations, not just underlying consumer inflation, must reach 2 percent,” he told a seminar on Friday.
The BOJ launched an intense burst of monetary stimulus in April, pledging to double the base money through aggressive asset purchases to achieve its 2 percent inflation target in roughly two years.
Core consumer prices in Tokyo, available a month before the nationwide data, are forecast to have risen 0.3 percent in September from a year earlier, slightly slower than a 0.4 percent annual rise in August.
Japan emerged from recession in 2012 and data for much of this year has shown the benefits of Prime Minister Shinzo Abe’s reflationary policies and the BOJ’s aggressive monetary stimulus.
The economy grew for a third straight quarter in April-June, comfortably outstripping many of its G7 counterparts, as businesses and consumers have started to increase spending on the back of a promising outlook.
Reporting by Stanley White; Editing by Shri Navaratnam