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Japan's consumer price inflation in August is close to its 8-year high

Image: Reuters Berita 24 English - Core consumer inflation in Japan sped up to 2.8% in August, which was the fastest annual rate in almost e...

Image: Reuters

Berita 24 English - Core consumer inflation in Japan sped up to 2.8% in August, which was the fastest annual rate in almost eight years. This was because higher raw material costs and a weaker yen put more pressure on the economy.

Core consumer inflation has been higher than the central bank's target of 2% for five months in a row. However, analysts don't think the Bank of Japan (BOJ) will raise interest rates soon because wage and consumption growth are still slow.

The data show the difficult situation the BOJ is in as it tries to support a weak economy by keeping interest rates very low. This, in turn, is fueling an unwelcome drop in the yen, which is driving up the cost of living for households.

The rise in the core consumer price index (CPI), which doesn't include volatile fresh food prices but does include fuel costs, was a little bigger than the median market prediction of a 2.7% rise and came after a 2.4% rise in July. It went up the most quickly since October 2014.

The so-called "core core" index, which takes out the costs of fresh food and energy, went up 1.6% from a year earlier in August, which was faster than July's 1.2% increase and the fastest annual rate since 2015.

The BOJ closely watches the core core index to see how much inflationary pressure comes from domestic demand.

In August, headline inflation hit 3.0%, the highest level since 1991. This shows how much consumers are being hurt by rising prices.

"In August, headline inflation rose to a new high since 1991, and it still has a long way to go. In spite of this, the Bank of Japan will stick to its ultra-easy monetary policy "The Japan economist at Capital Economics, Darren Tay, said this.

Once liked because it helped exports, the weak yen is now a problem for Japanese policymakers because it hurts retailers and consumers by making the prices of imported fuel and food go up even more.

The world's third-largest economy grew by 3.5% annually in the second quarter, which was better than the first estimate. But its recovery has been slower than that of many other countries because COVID-19 infections have come back, there aren't enough supplies, and the prices of raw materials are going up.

Even though inflation is still low compared to many other developed countries, a slowdown around the world and high energy prices are making things harder to predict. The BOJ has promised to keep interest rates very low and stay different from the rest of the world, which is tightening its monetary policy.

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