CPI pressures Bank of Japan with 41-year high

By Takaya Yamaguchi and Leika Kihara

TOKYO, Feb 24 (Reuters) – Core inflation in Japan hit a new 41-year high in January as businesses passed on rising costs to households, official data showed on Friday, keeping the the country’s central bank under pressure to phase out its massive stimulus package. program.

The data underscores the dilemma facing monetary policymakers as rising fuel and commodity prices hit households, many of whom have yet to see their wages rise enough to offset the rising cost of life.

Japan’s national core consumer price index (CPI), which excludes volatile fresh food prices but includes energy costs, was 4.2% higher in January than a year earlier , matching the median of market forecasts and accelerating the 4.0% annual increase recorded in December.

January’s rise was the fastest since September 1981, when the cost of fuel soared as the Middle East oil crisis hit Japan’s import-dependent economy.

Core inflation has exceeded the Bank of Japan’s 2% target for nine consecutive months, mainly due to persistently higher fuel and commodity prices.

“Inflation will likely peak in January, but it may not fall back below the Bank of Japan’s 2% target for some time,” said Yoshimasa Maruyama, chief economist at SMBC Nikko Securities.

“But there are questions about whether the rise in inflation will be sustainable, as it is still largely driven by the cost of food and fuel,” he added.

Incoming Bank of Japan Governor Kazuo Ueda faces the challenge of keeping monetary policy in check on sovereign yields, which have come under fire from markets betting high inflation will force the central bank to raise rates of interest.

(Reporting by Takaya Yamaguchi and Leika Kihara; Additional reporting by Tetsushi Kajimoto; Editing by Lincoln Feast and Bradley Perrett; Spanish editing by Dario Fernandez)