Japan’s inflation rises to a new 41 year high
Japan’s inflation rate is at an all-time high of 41 years. Businesses pass higher costs onto their customers.
The core consumer price index for the month ended December 2013 rose by 4% compared to a year ago, which is twice the Bank of Japan (BOJ’s) target level.
This puts pressure on the central banks to raise interest rates to ease rising living costs.
Investors were surprised when the BOJ announced this week that rates would remain near zero despite rising costs of fuel and food.
“Producer costs have been rising at an even faster pace than consumer price for some time now, but companies are passing these cost on to consumers,” Damian Thong from Macquarie Group’s Japan equity Research, told BBC.
“We are confident that the BOJ will be able to fulfill its mission.” [eventually] “End its negative interest rate policies,” he said.
Producer prices represent inflation at wholesale levels, while consumer prices reflect the amount households spend on goods and services.
Friday’s official data revealed that inflation reached its highest point since 1981. It was the ninth consecutive month it exceeded the central banks 2% target.
Even with the increase in prices, Japan still maintains one of the lowest rates of inflation worldwide.
This has meant that the third largest economy in the world has stopped following the lead of many other countries who have increased interest rates dramatically over the past year.
Wednesday’s BOJ interest rates were kept close to zero. This pushed the value of the yen against major currencies.
Many experts expected that the central banks would start to phase out its stimulus program in order to curb rising prices.
According to the latest figures, inflation in the US was 6.5% in December. It was 9.2% in Europe and 10.5% in the UK.