Nearly 86% of Japan households expect prices to rise a year from now, BOJ says

By Leika Kihara and Takahiko Wada

TOKYO (Reuters) -Nearly 86% of Japanese households expect prices to rise a year from now, a quarterly survey showed on Thursday, a sign of heightening inflation expectations that could help the central bank make the case for additional interest rate hikes.

The ratio of households that expect prices to rise a year from now stood at 85.6% in September, down from 87.5% in the previous survey taken three months ago, a survey by the Bank of Japan (BOJ) showed.

Of the total households surveyed, 83.6% said they expect prices to rise five years from now, up from 82.0% in the previous survey in June.

In a sign of the pain of rising living costs, food and daily necessities topped the list of items the respondents said they increased spending on compared with a year ago.

Dine-outs, clothing and travel were the top three items households reduced spending for compared with a year before, the survey showed.

The BOJ ended negative interest rates in March and raised short-term borrowing costs to 0.25% on the view Japan was making progress towards durably achieving its 2% inflation target.

Japan’s core consumer inflation hit 2.8% in August, exceeding the BOJ’s 2% target for well over two years, keeping alive expectations for further interest rate hikes.

(Reporting by Leika Kihara and Takahiko Wada; Editing by Jamie Freed and Sam Holmes)