Japan households' inflation expectations at 4-1/2 year high: BOJ survey

TOKYO (REUTERS) - Nearly three-quarters of Japanese households expect prices to rise a year from now, the highest ratio in four and a half years, a central bank survey showed, suggesting that bolder monetary stimulus is finally thawing public perceptions of intractable deflation.

An index gauging how households see economic conditions a year from now also improved for a second straight quarter to the highest level since the central bank launched the survey in 1996.

That added to signs that the world's third-largest economy is headed for a recovery driven in part by Prime Minister Shinzo Abe's aggressive monetary and fiscal policy prescriptions.

The ratio of households that expect prices to rise a year from now stood at 74.2 per cent in March, up from 53.0 per cent in December and the highest level since September 2008, the central bank said in its quarterly survey on Monday.

Only 3.9 per cent expect prices to fall a year ahead, down from 7.7 per cent in December. The survey was conducted from Feb 7 to March 6 and asked households for their views on the economy and prices.

Looking five years ahead, 81.6 per cent of households expected prices to rise, the highest ratio since June 2008, while 4.5 per cent forecast declines, the survey showed.

The diffusion index subtracting households that expect economic conditions to worsen from those that see improvements stood at plus 6.8, the highest level since the central bank began compiling the data in 1996.

The survey of about 4,000 adults nationwide is separate from the BOJ's "tankan" business sentiment survey, which gauges the mood of companies and was released earlier on Monday.

The tankan's headline index for big manufacturers showed its first improvement in three quarters but remained in negative territory, as pessimists outnumbered optimists.