Inflation in Tokyo keeps slowing, takes pressure off Bank of Japan
CORE inflation in Japan’s capital slowed for the second straight month in December, data showed on Tuesday (Jan 9), taking some pressure off the central bank to rush into exiting ultra-loose monetary policy.
The Tokyo inflation data, closely watched as a leading indicator of nationwide price trends, is among key factors the Bank of Japan (BOJ) will scrutinise at the next policy-setting meeting on Jan 22 and 23.
Separate data showed household spending fell for the ninth straight month in November, underscoring the fragile nature of Japan’s economy that may also keep the BOJ cautious about phasing out its massive stimulus too soon.
Tokyo’s core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, rose 2.1 per cent in December from a year earlier, government data showed, matching a median market forecast. It followed a 2.3 per cent rise in November.
The so-called “core core” index that strips away both fresh food and fuel prices – closely watched by the BOJ as a gauge of broader price trends – rose 3.5 per cent in December after a 3.6 per cent gain in November, the data showed.
With inflation having exceeded the BOJ’s 2 per cent inflation target for more than a year, many market players expect the bank to start phasing out its massive stimulus some time this year.
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BOJ Governor Kazuo Ueda has stressed the need to keep policy ultra-loose until recent cost-push inflation is replaced by a demand-driven increase in prices backed by solid wage gains.
Market players trimmed back bets of a January policy shift after a strong earthquake that hit western Japan last week and Ueda’s comments in a recent interview that he was in no rush to unwind ultra-loose monetary settings.
The BOJ’s quarterly meeting of regional branch managers on Thursday could offer clues on how convinced policymakers have become over prospects of sustained and broad-based wage gains, some analysts said.
The BOJ remains a dovish outlier among global peers, having maintained ultra-loose policy even as central banks elsewhere have raised interest rates aggressively and kept them elevated to fend off inflation risks. REUTERS
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