Japan inflation lacks momentum, keeps BOJ's target elusive
Reuters
Published Nov 22, 2018 04:09AM ET
Japan inflation lacks momentum, keeps BOJ's target elusive
By Leika Kihara
TOKYO (Reuters) - Japan's annual core consumer inflation was unchanged in October from the previous month as soft household spending kept firms from hiking prices, a sign the economy lacks the momentum needed to achieve the central bank's 2 percent target.
The nationwide core consumer price index (CPI), which strips away the effect of volatile food costs, rose 1.0 percent in October from a year earlier, government data showed on Thursday, matching a median market forecast.
With half of the gain due to higher energy costs, the Bank of Japan may face increasing difficulty achieving consistent price growth as global trade frictions and slowing Chinese demand cloud the outlook for the export-reliant economy.
In a sign inflationary pressure is barely building up, an index excluding the effect of both fresh food and energy costs showed inflation of 0.4 percent in October, steady for three straight months.
"The data shows it will take quite a long time for inflation to hit the BOJ's target," said Takeshi Minami, chief economist at Norinchukin Research Institute.
"The BOJ is unlikely to change its stance" of maintaining its massive stimulus program, he added.
BOJ Governor Haruhiko Kuroda reassured markets the central bank will "patiently maintain" its massive stimulus program as inflation remained distant from his target.
NEW HEADWINDS LOOM
Stubbornly soft inflation has dashed the BOJ's hopes that solid economic growth would translate into higher prices, forcing the central bank to maintain its huge stimulus despite unwelcome side-effects such as the erosion of financial institutions' profits from years of near-zero interest rates.
Despite grumbling over the rising negative impact of its stimulus, the BOJ is likely to keep inflation as its primary policy consideration, sources have told Reuters.
Many analysts expect core consumer inflation to stall at or slow from current levels in coming months, given recent declines in crude oil prices.
The central bank will face additional challenges from one-off factors that could push down consumer prices next year, such as expected cuts in mobile phone charges.
The darkening outlook for Japan's economy also bodes ill for the BOJ's efforts to fire up inflation to its elusive target.
Escalating Sino-U.S. trade frictions are beginning to hurt Japanese business sentiment, stoking fears that any rebound in growth from an economic contraction in July-September could be weaker than expected.
Japan's government maintained its upbeat economic assessment on Thursday but pointed to signs of weaknesses in Asia as trade frictions dim the region's growth outlook.
Get The News You Want
Overall annual consumer inflation, which includes fresh food and energy costs, ticked up to 1.4 percent in October from 1.2 percent in the previous month, as summer typhoons and rain damaged crops and pushed up vegetable prices.
Analysts say such rises in grocery prices could leave households with less money for non-essential spending, curbing consumption.
"Underlying trend inflation remains weak, and prices will continue to be swayed by external factors like currency and oil moves," said Taro Saito, an economist at NLI Research Institute.
"There's a good chance core consumer inflation will slide below 1 percent by the end of this year."
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.