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Inflation in Japans capital keeps slowing, takes pressure off BOJ

Published : Wednesday, 10 January, 2024 at 12:00 AM  Count : 144
TOKYO, Jan 9: Core inflation in Japans capital slowed for the second straight month in December as cost-push price pressures continued to ease, data showed on Tuesday, 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 January 22-23.
Separate data showed household spending fell for the ninth straight month in November, underscoring the fragile nature of Japans economy that may also keep the BOJ cautious about phasing out its massive stimulus too soon.
Tokyos core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, rose 2.1 percent in December from a year earlier, government data showed, matching a median market forecast. It followed a 2.3 percent rise in November and matched a low hit in June 2022.
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 percent in December after a 3.6 percent gain in November, the data showed.
"Companies are probably keen to keep raising prices but the pace of hikes appears to be slowing," said Yoshiki Shinke, senior executive economist at Da-ichi Life Research Institute.
"The hurdle for achieving sustained 2% inflation in Japan is high," he said, adding that he expects the nationwide core consumer inflation rate to fall below the BOJs 2 percent target late this year through early next year.
Energy prices fell 18.8 percent in December from a year earlier, more than a 16.7 percent drop in November, due to government subsidies and the base effect of last years spike, the data showed. The rise in food prices also slowed to 6 percent in December from 6.4 percent in November in a sign that cost-push pressures were dissipating.
With inflation having exceeded the BOJs 2 percent inflation target for more than a year, many market players expect the bank to start phasing out its massive stimulus some time this year. 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.    â€”Reuters



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