Japan's consumer price growth slows in April, BOJ's price goal stays elusive

Pedestrians cross the street at a crosswalk at Omotesando shopping district in Tokyo March 15, 2018. — Reuters pic
Pedestrians cross the street at a crosswalk at Omotesando shopping district in Tokyo March 15, 2018. — Reuters pic

TOKYO, May 18 — Japan's core consumer price growth slowed in April for a second straight month, government data showed today, displaying little of the inflationary momentum needed to reach the central bank's elusive 2 per cent target.

Subdued inflation and signs that growth may have reached its peak could discourage Bank of Japan policymakers from signalling their intention to end ultra-loose policy, analysts say.

“The broad-based moderation in price pressures in April underlines that the Bank of Japan won't be able to tighten monetary policy anytime soon,” said Marcel Thieliant, senior Japan economist at Capital Economics.

“We expect GDP growth to slow this year which suggests that capacity shortages won’t intensify any further.”

The core consumer price index, which includes oil products but excludes volatile fresh food costs, rose 0.7 per cent in April from a year earlier, slightly less than a median market forecast for a 0.8 per cent rise. It followed a 0.9 per cent gain in March, marking the second straight month of slowdown.

The core-core CPI, an index closely watched by the BOJ that strips away the impact of fresh food and energy costs, rose 0.4 per cent in April from a year earlier, slowing from a 0.5 per cent gain in March, the data showed.

While recent rises in oil costs may underpin price growth, many analysts expect inflation to fall short of the BOJ's goal in coming years as companies remain wary of raising prices for fear of scaring away cost-sensitive consumers.

Japan's economy contracted more than expected at the start of this year, suggesting growth has peaked after the best run of expansion in decades.

While many analysts expect growth to rebound in the current quarter, any indication of the economy hitting a plateau would be a bad omen for policymakers' efforts to lift Japan sustainably out of deflation.

The BOJ last month dropped a timeframe for hitting its price goal and Governor Haruhiko Kuroda has conceded that pushing up inflation expectations would take time. — Reuters

Related Articles