Japan’s price expectations weaken as pandemic stokes deflation fears

TOKYO: Japanese household inflation expectations hit an eight-year low in the three months to December, a central bank survey showed on Tuesday, suggesting the coronavirus pandemic has heightened deflationary risks in the world’s third-largest economy.

The outcome highlights the challenge the Bank of Japan faces in firing up inflation to its elusive 2% target, and keeps it under pressure to support an economy hit by a newly issued state of emergency to combat the pandemic. The ratio of households who expect prices to rise a year from now stood at 60% in December, down from 63.3% in September and hitting the lowest level since December 2012, the BOJ’s quarterly survey on households showed.

In a sign deflationary pressure was already heightening, the ratio of those who thought prices have risen from a year ago fell to 60.5% in December from 65.9% in September, it showed.

Households’ sentiment on the state of the economy improved somewhat but hovered near lows hit in 2009, when Japan was reeling from a global financial crisis triggered by the collapse of Lehman Brothers, according to the survey. Nearly 90% of households said they reduced the number of outings for leisure and entertainment compared with March last year, when the coronavirus began to spread.