Tokyo’s Consumer Price Index Hits Highest Level Since 1982

The nationwide inflation also reached a 40-year high in October

People shop at a drugstore chain store in downtown Tokyo, Japan, on Nov. 18, 2022. (Richard A. Brooks/AFP via Getty Images)

Consumer prices in Japan’s capital, Tokyo, rose 3.6 percent in November from the previous year, the fastest pace since 1982, owing to a weaker yen and higher energy prices, government data showed on Nov. 25.

Tokyo’s core consumer price index (CPI), which excludes fresh food items, exceeded the Bank of Japan’s (BOJ) 2 percent target for the sixth consecutive month, indicating persistent inflationary pressures, Kyodo News reported.

The rise exceeded the 3.5 median market forecast and the 3.4 percent increase seen last month. The last time Tokyo experienced faster inflation was in April 1982, when the core CPI was 4.2 percent higher than the previous year.

Of the components making up the Tokyo CPI data, services prices in November were up 0.7 percent on a year earlier, after a 0.8 percent annual increase seen in October.

That compared with a 7.7 percent spike in durable goods prices for November, which followed October’s 7.0 percent annual gain.

Similarly, the nationwide core CPI increased by 3.6 percent in October, the highest level in 40 years. Still, the BOJ views recent inflation as only temporary and will improve in the next fiscal year.

“On the price front, the year-on-year rate of increase in the CPI is projected to decelerate to a level below 2 percent from fiscal 2023,” BOJ Governor Haruhiko Kuroda said in a statement on Nov. 18.

The increase was primarily driven by rising energy prices (24.4 percent) and food prices (6.7 percent), excluding perishable items, according to Kyodo News.

Kuroda has repeatedly said that for inflation to sustainably hit his 2 percent inflation target, wages must rise enough to offset the rise in goods prices.

Slow wage growth has been among the factors delaying Japan’s recovery from the pandemic. The world’s third-largest economy unexpectedly shrank an annualized 1.2 percent in the third quarter, partly because of soft consumption.

The BOJ maintains its monetary easing policy despite the weakening yen amid a global policy tightening.

“The bank will continue with monetary easing, aiming to firmly support Japan’s economy and thereby achieve the price stability target of 2 percent in a sustainable and stable manner, accompanied by wage increases,” Kuroda said.

Mari Iwashita, chief market economist at Daiwa Securities, said the weak yen and rising food prices indicate the core CPI may remain around the BOJ’s 2 percent target for much of next year.

“Price hikes are broadening and suggest the weak yen could keep inflation elevated well into next year,” Iwashita told Reuters.

Japanese Prime Minister Fumio Kishida said in October that his government will spend 71.6 trillion yen (about $485 billion) on economic stimulus to help households and businesses cope with inflationary measures.

The economic package is expected to increase Japan’s gross domestic product by 4.6 percent and reduce consumer prices by 1.2 percent over the next year.

“We are targeting energy prices, a major factor behind the recent inflation, and curb rising prices in a visible way,” Kishida said at a press conference.

Reuters contributed to this report.