(Bloomberg) -- Japan’s households see inflation at record levels over the coming years, an uptick that will support the case for the Bank of Japan to raise interest rates in the near-term as the yen’s rapid depreciation ramps up pressure on the cost of living.
Households expect price levels to rise at an annual clip of 8.7% over the next five years, the highest in comparable data back to 2006, according to a quarterly survey by the BOJ published Friday.
Over the 12 months from now, they expect price growth of 11.5%, also the highest on record. Some 87.5%, the largest figure since 2008, said prices will go up significantly or slightly over the period.
The results suggest the yen’s slide and ongoing inflation are shifting people’s mindset over the cost of living. While weakness in their spending is a concern for the economy, expectations of rising prices are a key factor the BOJ will take into account when deciding on the timing of its next interest rate hike.
One-third of surveyed economists expect the BOJ to raise rates from the current 0 to 0.1% range at the end of this month.
A rate hike may help ease some of the downward pressure on the yen that has seen the currency plumb 38-year lows. The Ministry of Finance is suspected of conducting currency intervention late Thursday to stem the yen’s depreciation. The currency has shed more than 11% this year, making it the biggest loser among major currencies.
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