TOKYO (Reuters) – Japan’s core consumer inflation rate is expected to hit a forty-year high in October as a weak yen pushed up raw material costs for companies, leaving some with little option but to pass those on to households by hiking prices, a Reuters poll showed.
A surge in imports likely led to a $11 billion trade deficit last month, extending the run of shortfalls to 15 months and keeping downward pressure on the yen, according to the poll of economists.
The nationwide core consumer price index (CPI), which excludes volatile fresh food prices but includes energy, was expected to rise 3.5% in October, according to the median of economists’ forecasts in the poll. The government will release the data at 2330 GMT on Nov. 17.
The jump would mark the fastest gain since April 1982, and would come in above the prior month’s 3.0% advance. It also suggested that CPI would stay above the central bank’s 2% inflation target for a seventh straight month.
“While fees for overnight (hotel) stays declined due to the impact of nationwide travel subsidies, food costs likely saw a substantial rise due to price hikes for eating out and drinking,” economists at Nikko Securities said in a note.
Despite the broadening price pressures, which are a growing concern for households, the Bank of Japan (BOJ) has rejected joining a global trend of raising interest rates, vowing to stick to its ultra-easy policy and dovish guidance.
Other data next week is estimated to show Japan suffered a trade deficit of 1.61 trillion yen ($11.36 billion) last month, which would mark the 15th consecutive month of deficits.
The deficit would be slightly smaller than a 2.094 trillion shortfall in September.
Imports by value were expected to surge 49.7% in October from a year earlier, greatly outstripping a 28.1% expected rise in exports, the poll showed.
Core machinery orders, a leading indicator of business spending, were expected to rise 0.7% month-on-month in September, the poll also showed.
The government will release trade balance data at 2350 GMT on Nov. 16, while it will publish machinery orders data at 2350 GMT on Nov. 15.
($1 = 141.7200 yen)
(Reporting by Daniel Leussink; Editing by Kenneth Maxwell)