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2022 Growth Seen At 4.1%: Finance Minister

MNI (London)
By Hiroshi Inoue
     TOKYO (MNI) - Tokyo's year-on-year core consumer price index slowed in
December from the previous month's reading, undermining Bank of Japan
expectations for a pick-up in the pace, although BOJ officials will maintain the
view that momentum towards target is on track, MNI understands.
     BOJ policymakers will maintain their view that the momentum toward the 2%
price target is "maintained" as the upward pressure on prices stemming from the
improving output gap continues.
     That is despite the pickup in inflation being slower than the BOJ
previously expected, restricted by structural factors noted by the central bank
back in July. Officials remain vigilant over the inflation outlook as firms are
still cautious about raising retail prices amid lackluster consumer demand.
     The upward pressure on prices from rising materials and labor costs has
been somehow offset by corporate efforts to raise labor productivity by
investing in automation and information technology.
     Continued slow rise in consumer prices will likely prompt the BOJ board to
revise down the median forecast for inflation rate in the current fiscal year
from October's call of 0.9% and 1.4% for fiscal 2019.
     In central Tokyo, a leading indicator of nationwide price data, core CPI
rose 0.9% on year in December for the 18th straight year-on-year rise. However,
the pace of increase decelerated from 1.0% seen in each of the last three
     The data indicates the year-over-year rise in the national core CPI will
also decelerate in December from the 0.9% rise in November. The December data
will be published on Jan. 18, 2019.
     The core-core CPI (excluding fresh food and energy) -- a key indicator of
the underlying trend of inflation -- rose 0.6% on year in December, unchanged
from November's rate.
     BOJ economists are discouraged by lower goods prices in the December Tokyo
CPI data, increasing BOJ concern over the outlook for nationwide inflation rate.
     The prices of goods excluding volatile fresh food fell 0.1% on year in
December, with the pace of increase decelerating from 1.2% in November,
indicating that corporate price-hike activity hasn't expanded.
     One bright spot for BOJ officials are service prices, which account for
just over a half of the CPI basket. They rose 0.7% on year in December,
accelerating from 0.5% in November.
     The prices for eating out rose 1.2% on year in December, also accelerating
from 1.0% in November, indicating that corporate price hikes are spreading in
certain sectors, albeit slowly.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
--MNI London Bureau; tel: +44 203-586-2225; email:
MNI London Bureau | +44 203-865-3812 |