Japanese households remain convinced that prices will keep rising. The Bank of Japan’s quarterly Opinion Survey, published Tuesday, found 88.6% of respondents expect prices to be higher a year from now, down slightly from 90.4% in the previous survey in June, while the share expecting higher prices five years from now edged up to 86.5% from 86.1%.
The split between the two horizons is the detail that matters for policy. A small easing in the one-year reading suggests the sharpest phase of the current price shock is passing through household perceptions, but the five-year reading moving the other way says longer-term expectations are not re-anchoring lower. For a central bank that spent decades fighting deflationary expectations, the risk has flipped: expectations this widespread can sustain wage and price-setting behaviour that keeps inflation above target.
The survey arrives two weeks before the BoJ’s October 29-30 policy meeting. The bank raised its policy rate to 1.25% in September, and money markets have priced a high probability of a further increase by year end after Governor Kazuo Ueda’s hawkish turn. Household expectations alone will not decide the meeting, corporate goods prices surprised to the downside in September, but they remove one argument for patience: the public is not pricing a return to the old price regime.
Other BoJ releases in Tuesday’s poll underline how much of Japan’s rates story is now about transmission rather than direction. The central bank also published September data on financial-institution lending and on settlement fails in the JGB market, the plumbing indicators officials watch for signs that higher rates are straining the system they are tightening into.