Core inflation hits 2-yr low in Japan | 2019-07-22

Core inflation hits 2-yr low in Japan

21st July, 2019 11:37:50 printer

TOKYO: Japan’s core inflation slowed to its weakest in about two years in June, data showed Friday, underlining the nation’s long battle to boost consumer prices and adding to speculation the Bank of Japan could deliver more stimulus later this month.

With the global economy slowing and factory production faltering in the face of a bruising Sino-U.S. trade war, BOJ officials have said they remain ready to expand stimulus, joining the U.S. Federal Reserve in signaling that easing may come soon, report agencies.

BOJ Gov. Haruhiko Kuroda said Thursday the central bank would scrutinize economic developments until the last minute in deciding its policy this month, suggesting that whether to stand pat or increase stimulus will be a close call.

Japan’s core consumer price index, which includes oil products but excludes fresh food prices, rose 0.6 percent in June from a year earlier, matching economists’ median estimate.

The June reading was the weakest since July 2017, when the index climbed 0.5 percent, and compared with a 0.8 percent gain in May.

The so-called core-core CPI, which strips away the effects of volatile food and energy costs and is closely watched by the BOJ to gauge how much the economy’s strength has translated into price gains, was up 0.5 percent in June from a year earlier.

The data shows the central bank is still a long way off from achieving its elusive 2 percent inflation target as the U.S.-China trade dispute and slowing global demand put pressure on the export-reliant economy.

“The global economy is weakening and energy prices are on the decline, while Japan’s wage recovery is sluggish. Consumer inflation has not risen as per the BOJ’s scenario,” said Hiroaki Mutou, chief economist at Tokai Tokyo Research Institute.

“As the Fed is expected to cut rates in July, I think the BOJ will have to take action as the central bank is concerned about the yen’s movement.”

Data showed that the biggest contributory factor for the lower June core CPI index was a sharp slowdown in energy prices. Reduction in mobile charges by Japan’s major mobile carriers also weighed on the index.