MNI POLICY: Japan Jan CPI Accelerates But BOJ Caution Intact

--Japan Core CPI Up 0.8% y/y In January Vs. +0.7% in December

     TOKYO (MNI) - Japan's nationwide core consumer price index rose 0.8% on

year in January, accelerating from 0.7% in December, but Bank of Japan officials

are still cautious over the inflation outlook.

     Core CPI had been expected to edge higher in January, as Tokyo core CPI --

a leading indicator for the nationwide number -- had already shown an

acceleration from the previous month. However, inflation remains stubbornly slow

responding to a sustainable economic expansion and tight labor market

conditions, with firms still cautious over raising retail prices.

     Looking ahead, downward pressure on consumer prices from the past drop in

crude oil prices is expected to strengthen in the coming months. The positive

contribution from energy fell to +0.37 percentage point in January, down from

+0.45 percentage point in December.

     BOJ economists remain focused on how weaker prices lower the expected

inflation rate, which have been more or less unchanged in recent months.

     Those officials are still cautious on the outlook for prices as upward

momentum has yet to prove sufficiently sticky, although some food and drink

firms plan retail prices increases in or after April, the beginning of the new

fiscal year.

     High raw materials and transportation costs continue to pressure firms to

raise prices, with some finding difficulties in absorbing higher costs and BOJ

staff now await corporate annual price revisions, which are usually implemented

in April.

--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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