MNI BRIEF: BOJ Tankan: Business Inflation Expectations Solid

Inflation expectations of one, three and five years ahead at Japanese firms that Bank of Japan officials closely monitor were largely unchanged from September and remained solid, supporting the bank’s inflation outlook, the BOJ’s December Tankan survey released Monday showed.

Bank officials were encouraged by the stability of inflation expectations and sales prices, having been concerned that firms’ favourable inflation views could be undermined by trade policy uncertainty and weak global demand.

On average, companies saw the annual consumer inflation rate at 2.4% in December, unchanged from September. They also expected inflation to rise 2.4% three years ahead and 2.4% five years ahead, unchanged from the previous survey.

The Tankan showed that companies on average expect sales prices to rise 2.7% a year from now, slightly down from 2.8% in September.

Firms also expected sales prices to increase 4.3% three years ahead, unchanged from September, and 5.2% five years ahead, also unchanged from the previous survey.

The results indicate a continued willingness among companies to raise retail prices amid high labour and distribution costs, reinforcing the BOJ’s view that the wage–price virtuous cycle remains intact.