Japan’s core inflation rises

Japan’s core consumer prices rose for the first time in over a year in January thanks to a pickup in energy costs, but a slump in household spending showed why economic growth and inflation have lagged the more ambitious goals set out by policymakers.
As rising protectionism in the US poses risks for the world’s third-largest economy, as well as the rest of export-reliant Asia, there is a danger companies will shy away from boosting wages seen as crucial for durable growth.
That will also undermine the Bank of Japan’s (BoJ) efforts to accelerate inflation to its still-distant 2 percent target, analysts say.
Government data showed on Friday the core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices, rose 0.1 percent in January from a year ago, posting the first increase since December 2015.
It compared with a median market forecast for a flat growth and followed a 0.2 percent drop in December.
Many analysts expect core consumer prices to head toward 1 percent later this year. But that would still be half-way to the BoJ’s goal, which was put into perspective by separate data showing household spending slipped in January even as the job market tightened further.
“Inflation will accelerate this year due to a rebound in energy costs and the weak-yen effect. But it will not heighten much next year unless wages spike and boost spending,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.
“The hurdle for hitting 2 percent inflation remains very high, which means the BoJ will maintain its ultra-loose monetary policy for the time being,” he said.
The government began releasing from Friday a new index on consumer prices that excludes the effect of volatile fresh food and energy costs, which it says is useful in tracking consumer price trends that strips away one-off factors.
The index was up 0.2 percent in January from a year earlier, suggesting that recent yen declines are pushing up imported goods prices.
Low inflation in Japan, a phenomenon seen for much of the past two decades, remains the biggest hurdle to fostering a durable economic recovery — a goal that has eluded policymakers since the late 1990s.
More than three years of aggressive money printing by the BoJ failed to accelerate inflation as companies remain hesitant to boost wages, forcing the bank to revamp its policy last year to one better suited for a long-term battle against deflation. Separate data released on Friday underscored the dilemma.

Source: Arab News