TOKYO (AP) – Consumer prices in Japan rose to their highest level in more than 41 years in January, the government said on Friday, increasing pressure on the central bank to adjust its long-standing ultra-loose monetary policy.

A key price indicator that excludes volatile fresh produce rose 4.2% last month, although some analysts had expected it to be slightly higher. Excluding energy prices, inflation rose by 3.2% year on year.

The news comes after BOJ candidate Kazuo Ueda told lawmakers that the central bank’s current strategy is “appropriate” and that its near-zero benchmark must continue “to solidly support the economy.”

Ueda is expected to take over from BOJ Governor Haruhiko Kuroda, chief engineer for current policy, when his second five-year term ends in April. The nomination requires parliamentary approval.

The monetary policy of the Bank of Japan has been aimed at fighting deflation, and Japan’s inflation rate remains relatively low compared to the US and Europe.

“It takes time before the effect of monetary policy kicks in,” Ueda told Parliament, noting that price increases are reaching their peak.

The change in leadership at the central bank has attracted worldwide attention, with speculation that Ueda may roll back the monetary easing that Kuroda introduced nearly a decade ago.

But he refuted such expectations, saying that the current policy is necessary to achieve stable consumer prices and rising wages. He also stressed that the Bank of Japan works closely with central banks around the world and international financial institutions.

Ueda is a former member of the policy board of the Bank of Japan, but has a mostly academic background. He will have to maneuver in difficult times. While general inflation in Japan remains subdued, rising prices for oil, gas and other commodities have affected the prices of many consumer goods, utility rates and other costs.

The last time the core consumer price index rose as much as in January was in September 1981, according to the Japan Bureau of Statistics. At the time, oil prices rose sharply starting in the late 1970s, in what has been called the “oil shock”.

Under Kuroda, the Bank of Japan set a price growth target of 2%, but prices have risen at a faster pace in recent months. Producers and grocery stores are announcing price hikes one after the other.

Ueda said more time is needed to see that price increases are stable.

The change in leadership of the Bank of Japan could signal the abandonment of late Prime Minister Shinzo Abe’s “Abenomics” economic policy, said economic analyst Haruhiko Sato.

“Markets are feeling a little hesitant in anticipating policy changes, even if they happen gradually,” he said in a recent report.

Wage growth has generally not kept pace with inflation, exacerbating hardship for some households at a time when the Japanese yen has weakened against the US dollar and other currencies. This raises the purchase prices of imports, including energy and food.

Japan avoided a recession at the end of last year, demonstrating an annual growth of 0.6% in October-December after contracting in the previous quarter. The easing of COVID-19 restrictions both overseas and in Japan has led to a rebound in tourism and other economic activity.

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Yuri Kageyama on Twitter

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