Japanese companies expect inflation to stay around the central bank's 2 per cent target for years to come, a survey showed on Friday, disagreeing with Bank of Japan Governor Haruhiko Kuroda's view that the recent cost-driven price rise will prove temporary.
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The BOJ's "tankan" quarterly survey showed firms expect inflation to hit 2.4 per cent this year, up from 1.8 per cent projected in the previous poll. They see inflation at 2.0 per cent three years from now, also up from the March forecast of 1.6 per cent.
Corporate inflation expectations five years ahead stood at 1.9 per cent, the June tankan showed, up from 1.6 per cent in the March survey, the survey showed, a sign companies expect inflationary pressure to persist and keep price growth around the BOJ's 2 per cent target.
The poll on the inflation outlook, which usually draws little attention as analysts focus more on the tankan's business sentiment indices, came as a surprise to many analysts.
It also marks an important change in Japan's inflation expectations, which is among key factors the central bank scrutinises in determining whether its price target can be achieved on a sustained basis.
"This is amazing. It is a huge change," said Nobuyasu Atago, a former BOJ official who is currently chief economist at Japan's Ichiyoshi Securities.
"Companies are actually raising the sales prices of various goods. Given that fact, the inflation expectations of firms are likely overshooting a little, too."
BOJ officials have said long-term inflation expectations must heighten towards 2 per cent for the central bank to consider modifying its ultra-loose monetary policy.
