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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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MNI POLICY: Japan Sep CPI Drops 0.3%; 2nd Straight Fall
A weak September core consumer price index was no great surprise to Bank of Japan officials who expected the inflation rate to stay in negative territory for the time being, MNI understands.
However, bank officials are paying attention to how weak core CPI increases put downward pressure on the medium- to long-term expected inflation rate on which bank officials are focused.
The nationwide core CPI fell 0.3% y/y in September for the second straight decline following -0.4% in August.
Despite the continued weak core inflation, the BOJ is unlikely to adjust monetary policy to address the issue at present, concentrating instead on maintaining stability across financial markets and ensuring flows of funding to corporates.
The BOJ has noted that the momentum for the price stability target has been temporarily lost.
--CORE-CORE CPI FLAT
September core-core CPI excluding fresh food and energy items, the BOJ's preferred gauge of the underlying trend, was unchanged from a year earlier, following a 0.1% fall in August, and is at its lowest point since March 2017.
The fall in inflation was due mainly to the declines in energy items and accommodation costs caused by the government's "Go To Travel" campaign, with government subsidies lowering overall costs at hotels.
The BOJ sees the travel cost impact as temporary, but they still expect key inflation rates to be negative for a while, weighed down by the Covid-19 disruptions and the recent drop in oil prices, which will lower utility costs after a time lag.
Overall accommodation prices fell 30.0% y/y in September, slightly easing from a 32.0% fall in August. The negative contribution from accommodations narrowed to 0.35 percentage point from -0.42 pp in August.
--STEADY SERVICE, EATING OUT
Service prices were unchanged from a year earlier in September, improving from a 0.1% fall in August. The contribution turned to +0.01 pp in September from -0.05 pp in August.
Prices for eating out, another key BOJ focus, remained firm, up 2.8% y/y in September after rising 2.9% in August.
BOJ officials noted the rise in service prices despite the sector being the hardest hit by the coronavirus pandemic.
The bank believes that firms which might cut prices to stimulate demand during previous deflationary periods have not yet acted.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.