Japan inflation ticks up but still distant from BoJ’s goal
February 22 2019 11:08 PM
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Shoppers are seen at a supermarket in Tokyo. Japan’s annual core consumer inflation accelerated slightly in January but remained distant from the central bank’s 2% target, reinforcing market expectations the country is nowhere near an exit from ultra-loose monetary policy.

Reuters /Tokyo

Japan’s annual core consumer inflation accelerated slightly in January but remained distant from the central bank’s 2% target, reinforcing market expectations the country is nowhere near an exit from ultra-loose monetary policy.
The price data underscores the fragile nature of Japan’s economic recovery, as escalating Sino-US trade frictions and slowing Chinese growth weigh on exports and business sentiment.
The nationwide core consumer price index (CPI), which includes oil products but excludes volatile fresh food costs, rose 0.8% in January from a year earlier, government data showed yesterday.
It matched a median market forecast and accelerated slightly from a 0.7% rise in December, the data showed.
An index the BoJ focuses on – the so-called core-core CPI that strips away the effect of both volatile food and energy costs – rose 0.4% in January, ticking up from the previous month’s 0.3% gain. The increase was driven by a rise in service inflation, which may be a sign firms are passing on rising wage costs, said Marcel Thieliant, senior Japan economist at Capital Economics.
“We expect the labour market to remain tight over the coming year so service inflation may strengthen a little further.
Even so, falling energy prices mean that inflation will slow from 1% in 2018 to around 0.5% this year,” he said.
The BoJ faces a dilemma.
Years of heavy money printing have dried up market liquidity and hurt commercial banks’ profits, stoking concerns over the rising risks of prolonged easing.
And yet, subdued inflation has left the BoJ well behind its US and European counterparts in dialling back crisis-mode policies, and with a dearth of ammunition to battle an abrupt yen spike that could derail an export-driven economic recovery.
Some analysts say core consumer inflation may grind to a halt in coming months as recent oil price falls push down gas and electricity bills, which could put the Bank of Japan under pressure to ramp up an already massive stimulus programme.



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