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Jan core CPI rises 4.2% yr/yr, matches forecast
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Data underscore broadening inflationary pressure
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Incoming BOJ chief calls for need to keep ultra-low rates
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Policymakers face tricky balance as wage gains remain tame
(Adds graphic, incoming BOJ chief quotes in 9-10th paragraphs)
By Takaya Yamaguchi and Leika Kihara
TOKYO, Feb 24 (Reuters) - Japan's core consumer
inflation hit a fresh 41-year high in January as companies
passed on higher costs to households, data showed on Friday,
keeping the central bank under pressure to phase out its massive
stimulus programme.
The data underscores the dilemma policymakers face as
soaring prices of fuel and daily necessities hit households,
many of whom have yet to see wages rise enough to make up for
the higher cost of living.
The nationwide core consumer price index (CPI), which
excludes volatile fresh food but includes energy costs, was 4.2%
higher in January than a year earlier, matching a median market
forecast and accelerating from a 4.0% annual gain in December.
January's rise was the fastest since September 1981, when
fuel costs spiked due to the Middle East oil crisis and hit
Japan's import-reliant economy.
Core consumer inflation has now exceeded the Bank of Japan's
2% target for nine straight months, mostly reflecting persistent
rises in fuel and raw material costs, the data showed.
"Inflation will probably peak in January but may not fall
back below the BOJ's 2% target for some time," said Yoshimasa
Maruyama, chief economist at SMBC Nikko Securities.
"But there are questions as to whether the rise in inflation
will be sustainable, as it is still driven largely by food and
fuel costs," he said.
Incoming Governor Kazuo Ueda faces a challenge in sustaining
the BOJ's yield control policy, which has come under attack by
markets betting strong inflation will force the bank to raise
interest rates.
Speaking in
parliament , Ueda said the BOJ must maintain ultra-low rates as the recent acceleration in inflation is driven largely by rising raw import costs, rather than strong demand.
"Japan's trend inflation is likely to rise gradually. But it will take some time for inflation to sustainably and stably achieve the BOJ's 2% target," he told a lower house confirmation hearing on Friday.
Upon approval by parliament, Ueda is expected to succeed incumbent Haruhiko Kuroda when his term ends in April. At Ueda's debut policy meeting on April 28, the BOJ will release for the first time its inflation forecasts extending to fiscal 2025. Japan's economy averted recession in the fourth quarter of last year but rebounded much less than expected as business investment slumped. While private consumption is holding up against headwinds from rising living costs, uncertainties over the global economic outlook will weigh on Japan's delayed recovery from the scars of the COVID-19 pandemic, analysts say. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Japan's core inflation hits fresh 41-year high ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Takaya Yamaguchi and Leika Kihara; Additional reporting by Tetsushi Kajimoto; Editing by Lincoln Feast, Bradley Perrett and Kim Coghill)
Messaging: leika.kihara.reuters.com@reuters.net))