Japanese consumer prices fall at slower pace in Dec

TOKYO • Japan's core consumer prices fell at the slowest annual pace in nearly a year in December, a sign that inflation should pick up in the coming months on a rebound in oil costs and rising import costs from a weak yen.

The data, released yesterday, will be among factors the Bank of Japan (BOJ) will scrutinise at a policy meeting early next week, when it is widely expected to keep monetary policy steady and maintain its upbeat inflation projections.

While prospects of accelerating inflation offer some relief for the BOJ, many central bankers remain wary. They would much prefer that reaching their ambitious 2 per cent inflation target be the product of improving activity or consumer sentiment, not external factors such as oil and currency moves.

"Consumer prices will start rising ahead. But for inflation to approach 2 per cent, companies must more actively distribute profits" to households through wage hikes, said Mr Takeshi Minami, chief economist at Norinchukin Research Institute.

The prospect of that happening is not bright. Nearly two-thirds of Japanese firms are considering no wage hikes this year, a Reuters poll showed.

Core consumer prices, which include oil products but excludes volatile fresh food prices, slipped 0.2 per cent last month from a year earlier, government data showed.

Many analysts expect core consumer prices to turn positive in coming months and head towards 1 per cent later this year.

But some warn that global uncertainties, such as US President Donald Trump's protectionist streak, may make big manufacturers cautious about raising wages for fear of declining profits.

Overall consumer prices rose 0.3 per cent in December from a year earlier, as downward pressure from energy costs dissipated. But prices of durable goods, such as television sets and personal computers, continued to fall, a sign consumption remains too weak for retailers to hike prices.

The BOJ had blamed slumping oil prices among factors that hampered achievement of its 2 per cent target and argued a steady rise in household income will gradually push up inflation.


A version of this article appeared in the print edition of The Straits Times on January 28, 2017, with the headline 'Japanese consumer prices fall at slower pace in Dec'. Print Edition | Subscribe