Japan's July core inflation hovers at two-year low, adding pressure on Bank of Japan

By Daniel Leussink

Japan's core inflation was unchanged in July, government data showed on Friday, adding pressure to the Bank of Japan to expand its radical stimulus programme to meet its 2% price target.

The core consumer price index, which includes oil products but excludes fresh food prices, rose 0.6% in July year-on-year, matching economists' median estimate.

The reading for July matched the previous month's gain, which was the slowest pace since July 2017 when the index climbed 0.5%.

The so-called core-core CPI, which excludes the effects of volatile food and energy costs, was also up 0.6% in July from a year earlier. It is closely watched by the BOJ to gauge how much the economy's strength has translated into price gains.

But the data indicates the central bank remains well behind in its efforts to achieve its 2% inflation target as an eight-month long export slump on the back of the U.S.-China trade war and slowing global demand take a toll on the world's third-largest economy.

Expectations that the BOJ will ease further have grown, a recent Reuters poll showed, after the central bank at its last policy meeting committed to expanding stimulus if a global slowdown prolongs and threatens to derail Japan's economic recovery.

The economy grew an annualised 1.8% in the second quarter thanks to robust household consumption and business investment. But despite signs of strength at home, analysts have warned the timing of a pick-up in global demand is crucial for the growth outlook.

In July, the country's exports slipped for an eighth month, marking the longest run of declines in exports since a 14-month stretch from October 2015 to November 2016.

Separately, Japanese manufacturers' confidence turned negative for the first time since April 2013, the Reuters Tankan survey showed.

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what ever happened to the 2% that abenomics and kuroda promised years ago?

6 ( +6 / -0 )

They just keep singing the same old blues. Nothing has improved in the 8 years of Abenomics. In fact, it has gotten worse with sales tax increases.

7 ( +7 / -0 )

Gobalization and the modern "free market" economy are inherently deflationary. Get used to it.

1 ( +2 / -1 )

Fail to see what is the problem with deflation, prices go down its great news for people sitting on the sideline, waiting for an opportunity.

2 ( +3 / -1 )

How about the government take the lead to decentralize outside of Tokyo? There would be a massive building boom in the satellite locations.

4 ( +4 / -0 )

All those in Japan will soon be paying a tax to the government in order to possess savings...

5 ( +5 / -0 )

And they are still going to raise the taxes to 10% next month?

4 ( +4 / -0 )

How about the government take the lead to decentralize outside of Tokyo? There would be a massive building boom in the satellite locations.

Thats a good question, but Japanese dont want that; they prefer being in the city that supports people from all over Japan. Japan has beautiful areas outside of Tokyo but they are clanish, and dont want those areas populated by outsiders. Tokyo is full of outsiders. And you know Osaka, Kyoto and Nagoya hate Tokyo. Its complicated

2 ( +2 / -0 )

In 1984 a big bottle of Kirin and my local Izakaya was ¥220. Yen Dollar rate was ¥265/$100

Now at the same place the same bottle of beer is ¥600. Yen Dollar rate is $1.00/¥106.

Doesn't that appear to be not deflation but rather inflation?

0 ( +0 / -0 )

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