Japan household inflation expectations stay elevated despite slight easing

Japanese household inflation expectations have shown slight easing but remain significantly high, as evidenced by the latest Bank of Japan survey. The survey indicates that 86.0% of households anticipate prices to increase in the next year, down from 88.0% previously. This persistent expectation reflects ongoing anxiety around rising living costs. Households forecast an average price increase of 11.6% over the next year, with a median forecast of 10.0%. Long-term expectations have also softened slightly, with 83.0% of households expecting higher prices five years from now. The enduring high inflation expectations are crucial for the BOJ as it navigates monetary policy normalization after years of ultra-loose settings. Policymakers emphasize the importance of stable inflation expectations around the 2% target, supported by sustained wage growth.