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Japan’s prices rise at fastest pace since 1981

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Japan’s prices rose at their fastest pace in more than four decades in December, stoking expectations the country’s central bank could finally move away from ultra-low interest rates.

Consumer prices in the world’s third-biggest economy rose by 4 percent year-on-year, the sharpest rise since 1981, government data showed on Friday.

The price growth compares with a 3.7 percent rise in November, which also marked a four-decade high.

The inflation figures come days after the Bank of Japan (BOJ) opted not to shift away from its ultra-easy monetary policy, which has bucked an international trend towards higher interest rates.

Japan has since the 1990s swung between periods of sluggish inflation and deflation, encouraging policymakers to rely on low-interest rates to kick-start growth.

Although Japan’s inflation remains well below countries such as the United States and the United Kingdom, it is far above the BOJ’s long-held target of about 2 percent.

Analysts are divided on whether the BOJ may soon raise interest rates, in part because Japan’s inflation has been largely driven by rising energy prices – which climbed by 15.2 percent in December – instead of broad-based price growth.

BOJ Governor Haruhiko Kuroda, whose term will end in April, has said he favours sticking with an ultra-loose monetary policy until wages rise further.

Many Japanese companies, including the parent of casual clothing giant Uniqlo, have announced plans to increase wages amid rising prices and worsening labour shortages.

More than half of the big Japanese firms said they plan to raise wages this year, a poll by the Reuters news agency showed on Thursday, although smaller firms employing the vast majority of Japanese workers are seen as less able to afford higher pay.

Source : AL Jazeera