MNI POLICY: Tokyo CPI Rise Slows; BOJ Cautious Over Inflation

--Tokyo Core CPI Decelerates To 0.9% In December

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

indicator of the national average, stood at 0.9% on year in December, slowing

from 1.0% in November, reconfirming than any pick-up in inflation remains slow,

compared with the overall economic recovery.

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

the structural factors mentioned by the BOJ in July, 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

0.9% on year in December for the 18th straight year-on-year rise, with the pace

of increase decelerating from November's 1.0%, government data released Friday

showed.

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

the underlying trend of inflation -- rose 0.6% on year in December, unchanged

from November's rate.

     --LEADING INDICATOR

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

on Jan. 18, 2019. It indicates that the core CPI in December will rise 0.9% on

year, unchanged from November -- although November's nationwide CPI came in

below the Tokyo level.

     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 next year, worrying

BOJ officials who are expecting to see a gradual rise in the inflation rate.

--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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