Japan’s Inflation Slows Again as Cheaper Oil Undermines the BOJ By Bloomberg

© Reuters.  Japan’s Inflation Slows Again as Cheaper Oil Undermines the BOJ

© Reuters. Japan’s Inflation Slows Again as Cheaper Oil Undermines the BOJ

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(Bloomberg) — Japan’s key inflation gauge slowed in the first back-to-back decline since April, highlighting the difficulty of the Bank of Japan’s price goal ahead of its policy meeting next week.

Consumer prices excluding fresh foods rose 0.7 percent from a year earlier in December, according to the ministry of internal affairs Friday. That’s slightly weaker than a median estimate of 0.8 percent.

Key Insights

  • After providing most of the inflation gains for much of last year, cheaper oil is now limiting the support for prices from energy.
  • The slowdown thanks to oil is likely to prompt the BOJ to to cut its inflation forecast, according to people familiar with the matter.
  • An increasing number of economists think the BOJ will stick with its current stimulus this year, even as side effects increase.
  • Japanese households remain wary of higher prices and the government is on guard against anything that may reduce household spending ahead of a sales-tax hike scheduled for October.
  • Some economists, including former BOJ chief economist Hideo Hayakawa, point out the risk of core inflation diving below zero percent this year far from its 2 percent goal.

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  • Overall, consumer prices rose 0.3 percent in December from a year ago, versus expectations for an increase of 0.3 percent.
  • Excluding energy and fresh food, inflation rose 0.3 percent. The forecast was for a gain of 0.3 percent.

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