Core consumer prices in Japan declined in December for ninth consecutive month, while household spending recorded a decline in November. This dynamic shows that the economy still has not enough momentum to encourage inflation to the target level of 2%. The core inflation in Tokyo, which is a leading indicator of prices at the national level, recorded the sharpest decline in nearly four years. The index of core consumer prices, which excludes fresh food but not oil, fell by 0.6% in December, while the expectations were for a decline of 0.4%.
However, many analysts expect the inflation to accelerate in 2017, reflecting the recovery in oil prices and the depreciation of the local currency, which can raise import prices. This in turn will reduce the pressure on the Bank of Japan to expand the already massive stimulus program.
The data on core inflation for the whole country is in November and prices decreased by 0.4% yoy, while the median forecast of the analysts was for a drop within 0.3%.
The data was a further blow to efforts from the government and the Bank of Japan to pump up the world’s number three economy with massive public spending and aggressive monetary easing.
Tokyo officials have blamed external factors, such as falling energy prices and uncertainty related to emerging economies, for their failure to achieve a promised two per cent inflation target. For more than three years, BoJ policymakers have embarked on a bond-buying stimulus program to try to keep interest rates low and increase borrowing and spending.