Japan households’ inflation expectations hit highest in 20 years

Japanese households’ average inflation expectations for the next five years rose to a record high, a Bank of Japan survey showed Thursday.

Households expect prices to increase by an average of 10.8% annually over the next five years, up from 10.3% in the previous quarterly survey and 9.8% in December.

The figure was the highest since the bank began conducting the survey under its current methodology in 2006, while the median expectation remained unchanged at 5%.

The survey showed that 51.3% of respondents expected prices to rise significantly over the next five years, up from 46% in March.

Another 34.8% expected prices to rise slightly, bringing the overall proportion anticipating higher prices to 86.1%.

For the next year, 90.4% of respondents expected prices to increase, including 40.5% who forecast a significant rise.

Meanwhile, the proportion of households that considered interest rates too high increased to a record 24% from 22% in March.

Some 33.3% said interest rates were too low, while 40.8% considered them appropriate.

The survey was conducted from May 7 to June 9 among 4,000 people aged 20 or older, with 2,031 valid responses.

The findings came after the bank raised its benchmark interest rate to 1% in June, its highest level since 1995.