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Free AccessREPEAT: MNI INSIGHT: BOJ Sees CPI Pickup To Support Bid For 2%
Repeats Story Initially Transmitted at 04:06 GMT Dec 26/23:06 EST Dec 25
By Hiroshi Inoue
TOKYO (MNI) - Bank of Japan officials are confident that the latest pickup
in consumer prices will continue to support the path toward the bank's 2%
inflation target but they remain cautious because it takes some time before slow
wage and price hikes will boost CPI, MNI understands.
A slight pickup in the pace of year-on-year gains in the consumer price
index released Tuesday is the last piece of CPI data before the BOJ board holds
its next policy meeting on Jan. 22-23, when it also updates its medium-term
growth and inflation projections in the quarterly Outlook Report.
At this point, there is no hard data to suggest that the board should lower
its core CPI forecasts again in January after revising its median forecast for
fiscal 2017 down to +0.8% in October from +1.1% projected in July and the one
for fiscal 2018 down to +1.4% from +1.5%.
Despite expected fading of support from past energy price rises, it is too
early to consider pushing back the bank's estimated timing of achieving the 2%
price stability target from fiscal 2019, when the board expects core CPI
(excluding fresh food) to rise 1.8% from the previous year.
--GRADUAL CPI PICKUP
Data released Tuesday showed that the national average core CPI (excluding
fresh food) rose 0.9% on year in November for the 11th straight year-on-year
rise, with the pace of increase accelerating from +0.8% in October.
The year-on-year rise in energy prices slowed to +8.5% in November from
+8.6% in October, which was expected, while the rise in processed food edged up
to +1.1% from +1.0%.
Goods prices excluding volatile fresh food prices rose 1.8% on year in
November, up from +1.7% in October, reflecting higher import and labor costs.
By contrast, service prices rose just 0.1% in November after being
unchanged in October, indicating some firms are resisting price hikes amid tough
competition by absorbing higher materials and labor costs by investing in
technology and curtailing business hours.
Excluding upward pressure from energy prices, the underlying price trend
showed a slight pickup after stagnating.
The core-core CPI (excluding fresh food and energy) rose 0.3% on year in
November after rising 0.2% in each of the previous three months.
Total national CPI rose 0.6% on year in November, accelerating from +0.2%
in October in light of a rebound in fresh food prices, but the pace of increase
was still slower than +0.7% in September.
BOJ economists are closely watching two segments in the CPI data as leading
indicators of the overall price trend.
The prices for processed food (canned food, bread, snacks, beverages, etc.)
rose 1.0% on year in November after rising at the same pace in October. Those
for durable goods were unchanged in both November and October.
However, BOJ officials are not too concerned about the slow progress
because the pace of increase in both items rose in the CPI data for central
Tokyo.
--TOKYO PRICES UP
The Tokyo core CPI, which sometimes leads the national trend, rose 0.8% on
year in December after rising 0.6% in November, indicating that the year-on-year
rise in the national core CPI in December is expected to accelerate from
November's +0.9%.
In the capital, the prices for processed food rose 0.8% on year in
December, up from +0.3% in November, while those for durable goods gained 0.4%
on year, up from -0.2%.
BOJ officials believe that companies are facing more upward pressures to
raise retail sales and wages, compared with several months ago, as materials and
labor costs have risen.
BOJ officials are hoping that annual wage negotiations between major
corporations and their unions set a firmer tone for people's price outlook for
fiscal 2018 starting in April.
--UNEMPLOYMENT A BRIGHT SPOT
Other government data released Tuesday indicate the slow pickup in
inflation will receive some support from tightening labor conditions.
The seasonally adjusted average unemployment rate fell to 2.7% in November
from 2.8% in October, hitting a 24-year low.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com
--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com
--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com
To read the full story
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Please enter your details below.
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.