By Leika Kihara
In a fresh indication of growing price pressure, a key measure of Japan’s trend inflation surged to 2.2% in October, setting a new record high. The data, revealed on Tuesday, underscores the need for the central bank to scale back its massive monetary stimulus.
Recent trends point to sustained wage increases leading firms to raise prices for their services, a development seen as essential by the central bank to bring an end to ultra-low interest rates.
The 2.2% year-on-year rise in the weighted median inflation rate, a closely monitored indicator of broadening price increases, surpassed the 2.0% gain in September, marking the fastest escalation since comparable data became available in 2001, according to Bank of Japan (BOJ) data.
The upcoming policy-setting meeting on Dec. 18-19 will see the BOJ scrutinizing these figures as they weigh their next moves.
Despite exceeding its target for over a year, the BOJ has pledged to maintain super-low interest rates until sustained 2% inflation backed by solid consumption and wage increases can be achieved.
BOJ Governor Kazuo Ueda expressed cautious optimism, citing positive signs in wages and inflation while acknowledging high uncertainty on the strength of this cycle.
Amid indications from various sectors, including businesses, unions, and economists, that tight labor market conditions and cost pressures will persist, the stage is set for another round of wage talks next year.
The weighted median, a measure representing the middle point of price changes, is instrumental in tracking the widespread nature of price increases.
After two decades of minimal movement, the weighted median inflation rate began rising last year, reflecting companies passing on surging raw material costs.
Unlike the consumer price index (CPI), the weighted median inflation rate provides a clearer indication of overall price movements by excluding the influence of fuel and energy costs.
(Reporting by Leika Kihara; Editing by Kim Coghill)
