Inflation in Japan hits 41-year high

Inflation in Japan rose to 4 percent in December. Prices in the country, which has experienced the longest period of deflation in the world, rose to a 41-year high. Consumer price growth in Japan reached 4 percent annually in December, breaking a new threshold. Core inflation was also in line with expectations at 4 percent. Annual inflation was driven by processed food, which recorded the fastest price increase since 1976, and gas prices, which rose more than 20 percent. The fact that inflation is at its highest level since 1981 may support speculation that the Bank of Japan will abandon its loose policy. However, according to many economists, the current price increase is in line with the bank's forecasts and will not be enough to change the bank's policy. Daiwa Securities Chief Economist Toru Suehiro said, "Governor Haruhiko Kuroda has a few months left before he leaves, and I think the BOJ will continue with its current policy." Speculation that the BOJ, which shook the markets by raising the yield target ceiling in December, will tighten was most reflected in Japanese bond yields.