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Tokyo Inflation Hits 4% First Time In 4 Decades; Japan Household Spending Unexpectedly Declines


Inflation in Japan’s capital Tokyo hit 4 percent for the first time in four decades at the end of 2022, lifting speculation over a shift in the Bank of Japan’s massive monetary easing stance.

Separate data showed an unexpected fall in overall household spending in November, driven by rising consumer prices.

The consumer price index, or CPI, excluding fresh food rose 4.0 percent in December, faster than the 3.6 percent increase in November, the Ministry of Internal Affairs and Communications reported Tuesday. The core inflation rate exceeded 3.8 percent economists had forecast.

Overall consumer price inflation also hit 4.0 percent, up from 3.7 percent a month ago.

ING economist Min Joo Kang said the new Bank of Japan governor, who takes office in April, is likely to first adjust the central bank’s forward guidance in the second quarter and then call for a policy review in the third quarter.

Reports and surveys suggested that the current Deputy Governor Masayoshi Amamiya or his predecessor Hiroshi Nakaso are the front-runners in the race to be at the helm of the Japansese central bank. Kuroda’s term ends on April 8.

The ING economist also believes that revisiting inflation targets could be a consideration, which was indicated by the Japanese Premier Fumio Kishida last week.

Kishida and BoJ Governor Haruhiko Kuroda also urged companies to raise wages in the backdrop of rising inflation. Their comments came as official data revealed that wages declined at the sharpest pace in 8 years in November.

Another report from the ministry showed that household spending decreased 1.2 percent on a yearly basis in November, reversing the 1.2 percent increase seen a month ago and confounded the expected growth of 0.5 percent.

Month-on-month, household spending decreased 0.9 percent, in contrast to the 1.1 percent increase seen in October. The pace of decline was also bigger than economists’ forecast of -0.5 percent.

Households of two or more people spent an average JPY 285,947 in November.

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