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MNI POLICY: Japan Nov CPI Picks Up But BOJ Caution On Outlook

MNI (London)
By Hiroshi Inoue
     TOKYO (MNI) - Japan's core consumer price index accelerated in November,
but Bank of Japan policymakers are little moved in their outlook as the expected
gains were largely the result of the sales tax hike.
     Despite the pick-up, the inflation rate still lacks upward momentum,
although the BOJ sees it as largely on track, even if not expecting any sharp
gains.
     --CORE CPI RISES
     Japan's core CPI rose 0.5% on year in November, a 35th straight gain, with
the pace accelerating from 0.4% in October but lower than the 0.9% seen in
April.
     The rise had been indicated by the previously released November Tokyo core
CPI, which rose 0.6% in November following a 0.5% gain in October.
     --WEAKER PRICE WORRY
     BOJ officials are concerned over the sustainability of higher prices as
sluggish consumer spending following the tax hike will impede corporate price
hikes, or even prompt firms to lower their retail prices.
     Economic data showing private consumption remained weak in October and
November, indicating that consumers are suffering from the drop in real income
caused by the tax hike.
     The tightness in labor market situation among manufacturers eased somewhat
due to the slowdown in overseas economies.
     The BOJ doesn't expect the easing labor market situation to filter through
to non-manufacturers immediately, where shortages continue.
     Negative contribution from energy prices in November was -0.17 percentage
point from -0.22 pp in October.
     --SOLID PROCESSED FOODS
     Prices for processed foods, accounting for 15% of the total CPI that BOJ
officials focus on, and for eating out remained firm.
     Prices for processed foods rose 1.4% in November, unchanged from +1.4% in
October, and prices for eating out -- another key BOJ focus -- were up 3.3% in
November, up from +3.2% in October, indicating firms passed costs on.
     The overall CPI rose 0.5% on year in November, up from +0.2% in October,
but saw gains capped by downward pressure from weak energy price (-2.1% on year
in November -2.7% in October). Prices for household durable goods, which rose
5.4% on year in November vs. +6.4% in October.s lower than the recent high of
+0.9% 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
[TOPICS: MMJBJ$,M$A$$$,M$J$$$]
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com

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