December 15, 2016 / 12:29 AM / 8 months ago

BOJ survey - Japan firms expect CPI to rise 0.7 percent a year from now

A man runs past the Bank of Japan (BOJ) building in Tokyo, Japan, July 29, 2016.Kim Kyung-Hoon/File Photo

TOKYO (Reuters) - Japanese companies' long-term inflation expectations edged up slightly in December, a Bank of Japan survey showed on Thursday, suggesting a weak yen and signs of a pick-up in consumer spending could lift prices.

The survey comes a day after large manufacturers' sentiment featured in the BOJ's "tankan" survey rose to a one-year high on improving domestic and overseas demand.

The results should offer some encouragement to central bank officials, who are likely to upgrade their economic outlook at a monetary policy meeting next week.

Japanese companies expect consumer prices to rise an average 0.7 percent a year from now, higher than their projection three months ago of a 0.6 percent increase, a central bank survey showed.

Firms polled by the BOJ said they expect consumer prices to rise at an annual rate of 1.0 percent three years from now, unchanged from three months ago.

Firms also expect consumer prices to rise 1.1 percent five years from now, slightly higher than a 1.0 percent increase expected in September.

The BOJ is leaning toward upgrading its economic outlook at a meeting ending Dec. 20 because officials are becoming increasingly confident that global trade is emerging from the doldrums, four sources familiar with the bank's thinking said.

They also see initial signs of recovery in private consumption, a perennial weak spot in Japan's economy, with service-sector sentiment hitting a nearly three-year high.

The BOJ started the survey on corporate price expectations from the March 2014 tankan to gather more information on inflation expectations, key to its current stimulus programme.

The BOJ overhauled its policy framework in September to focus on controlling interest rates amid growing concerns that its aggressive purchases of government debt were unsustainable.

Reporting by Stanley White; Editing by Eric Meijer

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