MNI POLICY:Tokyo CPI Rise Accelerates;BOJ Cautious View Intact

--Tokyo Core CPI Accelerates To 1.1% In Jan From +0.9% in Dec

By Hiroshi Inoue

     TOKYO (MNI) - The pace of the annual inflation rate in Tokyo, a leading

indicator of the national average, accelerated in January from the previous

month but the Bank of Japan's cautious view on price outlook persist.

     The Tokyo core CPI rose 1.1% on year in January, accelerating from a 0.9%

gain in December, but the January rise was due mainly to higher positive

contribution from crude oil prices (+0.40 percentage points in Jan. vs. +0.38

pts in Dec).

     The pick-up in inflation remains slow, compared with the economic recovery

and the labor market tightening.

     The data showed that the rise in the inflation rate is still restricted by

the structural factors mentioned by the BOJ in July 2018, and the central bank's

view on the outlook for inflation remains cautious.

     In central Tokyo, the core consumer price index excluding fresh food rose

1.1% on year in January for the 19th straight year-on-year rise, with the pace

of increase accelerating from December's 0.9%, government data released Friday

showed.

     The core-core CPI (excluding fresh food and energy) -- a key indicator of

the underlying trend of inflation -- rose 0.7% on year in January, also

accelerating from +0.6% in December.

     --LEADING INDICATOR

     Tokyo CPI is a leading indicator of the national CPI for January, due out

on Feb. 22. It indicates that the core CPI in January will rise 0.8% or higher

on year from +0.7% in December.

     The rise in Japan's inflation rate remains muted, but BOJ officials

maintained the view that Japan's inflation rate is expected to gradually rise as

the output gap remained positive territory. But looking ahead, the pace of

pick-up is expected to slow as the positive contribution from the rise in crude

oil prices will weaken in or after April, worrying BOJ officials who are

expecting to see a gradual rise in the inflation rate.

     The BOJ board Wednesday lowered the median inflation forecast in fiscal

2019 to +0.9% from +1.4% in October. The median inflation forecast in fiscal

2020 was also lowered to +1.4% from +1.5%.

     But the board maintained the view that the momentum toward achieving the 2%

price target is maintained.

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

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