Japanese households’ inflation expectations rose to the highest level on record on elevated costs of living, highlighting potential challenges for the Bank of Japan’s monetary policy efforts as it also confronts the impact of U.S. tariff measures.
Households expect average annual inflation of 9.6% over the next five years, the highest since June 2006, according to a quarterly survey from the central bank released on Friday. At the same time, their impressions of current economic conditions worsened to minus 59.8, the lowest since December 2022, from minus 55.9 previously.
The data add to evidence that economic conditions have evolved in line with the BOJ’s outlook, laying the groundwork for another rate hike. Surging food costs may be of particular concern. The price of rice climbed 80.9% in February, the biggest increase in 54 years. That’s not lost on households, which reported they felt as though overall prices had risen 19.1% over the past year, according to the BOJ’s survey. That’s five times the actual inflation rate in the latest data for the period.
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