Japan's Dec core inflation slows for 2nd straight month

Credit: REUTERS/KIM KYUNG-HOON

By Leika Kihara and Takahiko Wada

TOKYO, Jan 19 (Reuters) - Japan's core inflation stayed above the central bank's 2% target in December but slowed for a second straight month, data showed on Friday, reinforcing expectations it will be in no hurry to phase out its massive monetary stimulus.

The data, which matched median market forecasts, highlights receding inflationary pressure from raw material imports, and heightens the chance the Bank of Japan will maintain ultra-low interest rates at .

The core consumer price index (CPI), which excludes fresh food but includes energy costs, in December rose 2.3% from a year earlier, government data showed, marking the slowest pace of increase since June 2022.

It followed a 2.5% rise in November.

The "core core" index that strips away both fresh food and energy prices, closely watched by the BOJ as a better gauge of the broader price trend, in December rose 3.7% from a year earlier after a 3.8% gain in November.

Japan's core consumer inflation has exceeded the BOJ's 2% target since April last year as soaring raw material costs prodded many firms to pass on higher costs.

After peaking at 4.2% in January, inflation has slowed due to easing cost-push pressures in line with the BOJ's forecasts.

The key from here is whether wage hikes accelerate enough to give households purchasing power, so that companies can continue price hikes and keep inflation durably at the BOJ's 2% target.

While the BOJ is expected to end negative rates sometime this year, Governor Kazuo Ueda has stressed the need to maintain ultra-loose policy until inflation can stay around 2% for a durable amount of time while wages rise on a sustainable basis.

(Reporting by Leika Kihara and Takahiko Wada; Editing by Jamie Freed)

((leika.kihara@thomsonreuters.com; +813-6441-1828; Reuters Messaging: leika.kihara.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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