Nearly 90% of Japanese households expect prices to rise in the next year, according to a quarterly Bank of Japan (BOJ) survey, indicating growing inflation expectations.
This increase, from 83.3% in March to 87.5% now, marks the highest level in 16 years.
The survey also found that 82.0% of respondents expect prices to rise over the next five years, up from 80.6% previously.
Despite these inflation expectations, households are more pessimistic about the current economic conditions compared to three months ago, which could negatively impact consumption.
The BOJ takes household perceptions of future inflation into account when deciding on interest rate changes, along with factors like consumption and wages.
Companies also expect inflation to approach the BOJ’s 2% target, with expectations of 2.3% inflation in three years and 2.2% in five years.
The BOJ is making progress towards its 2% inflation target, a necessary condition for raising interest rates.
While many expect a rate hike this year, the timing is uncertain.
Some analysts believe weak consumption could delay the BOJ’s decision.
The central bank’s next policy meeting is on July 30-31, where these factors will be considered.