A quarterly survey released on Tuesday revealed that Japanese householders' inflation expectations have climbed to a more than two-year high, indicating that the growing cost of living is starting to affect public perceptions about future price movements.
The result provides some encouragement for the Bank of Japan's efforts to push inflation to its target of 2%, in part by shifting public perceptions of persistent deflation, with aggressive monetary easing.
According to the BoJ survey conducted between November 5 and December 1, the percentage of households that expect prices to rise in a year increased to 78.8%, up from 68.2% in September and reaching its highest level since September 2019.
80.8% of respondents said they expect prices to rise in five years, up from 78.1% in the previous survey and the highest figure since December 2019.
The survey is one of the pieces of data the BoJ will likely examine at its policy meeting next week to see if growing input costs have affected households' inflation expectations.
Sluggish wage growth weighed on consumption, deterring firms from raising prices, and nearly nine years of ultra-easy policy failed to fire up inflation to the BoJ's objective.
While wholesale inflation touched a new high of 9.0% in November due to rising global commodity prices, core consumer inflation was just 0.5%, owing in part to the coronavirus pandemic's impact on consumption.
Some analysts predict that core consumer inflation will exceed 1.5% in April, as the impact of last year's cellphone charge cuts fades and prior increases in oil prices push up electricity bills.
Many BoJ policymakers believe that any increase in inflation will be unsustainable unless it is accompanied by steady wage growth, citing Japan's persistent deflationary sentiment.