MNI POLICY: Japan Dec CPI Picks, But BOJ Cautious On Outlook

By Hiroshi Inoue

     TOKYO (MNI) - Japan's core consumer price index accelerated in December,

but Bank of Japan officials are little moved in their outlook, concerned over

the risk that sluggish private spending may hinder companies looking to hike

prices.

     Japan's core CPI rose 0.7% y/y in December, a 36th straight month of gains,

with the pace accelerating from 0.5% in November but still lower than the 0.9%

seen in April 2019.

     The gain was also boosted by volatile accommodation prices, higher by 3.8%

in December against a 1.7% gain in November. 

     December's rise was widely expected following the gain in the already

released Tokyo data, a leading indicator of nationwide inflation, which rose

0.8% y/y from a 0.6% gain in November.

     BOJ officials were somewhat surprised by the higher nationwide CPI number,

as they had felt December's surprise Tokyo core CPI for December was higher for

city-specific reasons.

     The Bank also judged companies have been suffering from higher costs and

have acted to raise retail prices to offset. 

     --SOLID PROCESSED FOODS

     Prices for both processed foods and for eating out remained firm in

December, both reflecting higher corporate prices. Against that, prices for

household durable goods rose 3.3% in December, slowing from November's 5.4%

gain. 

     Despite December's pick-up in corporate prices, BOJ officials are concerned

over its sustainability if household spending remains sluggish.

     Core-core CPI, which excludes fresh food and energy and is a key BOJ focus,

rose 0.9% y/y in December, accelerating from November's 0.8% gain, recording a

30th straight rise.

     Core CPI rose 0.6% y/y across 2019, a third straight rise but slowing from

the 0.9% gain in 2018 .

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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