By BLOOMBERG

Inflation expectations for Japanese households jumped to the highest in 13 years, showing how costlier energy is influencing sentiment even as overall price gains remain far below the Bank of Japan’s target. 

Households see inflation of 5% by next year, the most expected since December 2008, according to a quarterly survey by the central bank published Tuesday. They expect annual price increases of 3% on average over the next five years, a time span that central bankers look at more closely to steer monetary policy.

Even as the the survey results depart from a reality where core inflation is running well below 1%, they show that a wave of price gains sweeping the globe is also hitting Japan, albeit in muted form. They also underscore the risk that price hike fears could sour consumers just when their spending is needed to carry the recovery.  

That seems unlikely for now, though. The BOJ’s survey also showed households were the least pessimistic about the outlook since 2013 as the economy heals from the pandemic.

For its part, the BOJ is likely to discuss the possible ditching of a long-held view that price risks are mainly on the downward side at a policy meeting next week, according to people familiar with the matter. 

The bank is still seen standing pat on its stimulus for the foreseeable future, given its view that price growth won’t hit the 2% target anytime within its forecast period.