© Reuters.
Investing.com — Japan’s core CPI inflation fell as expected in November amid a decline in food prices, as the reading cast more doubt on when the Bank of Japan could begin tightening its ultra-loose policy.
Data from the Statistics Office showed on Friday that the index, which excludes volatile fresh food prices, rose 2.5 percent year-on-year. The reading was in line with analysts’ expectations, and slowed from the previous month’s reading of 2.9%.
The year-on-year reading was also at its slowest pace since August 2022, while month-on-month core inflation growth became flat.
Core inflation remains well above the Bank of Japan’s annual target of 2%, although whether steady inflation will prompt the bank to tighten policy early remains unclear, after it presented it during its last meeting of 2023.
The core reading that excludes fresh food and fuel prices, which the Bank of Japan closely monitors, slowed to 3.8% year-on-year from 4% the previous month, suggesting that core inflation is also declining.
It grew by 2.8% year-on-year in November, slowing from the 3.3% recorded in the previous month. The monthly decline in food and energy prices was the main driver of the weak inflation reading.
The inflation figures come amid some slowdown in the Japanese economy, as consumer and capital spending have slowed in recent months due to headwinds from global markets.
Data earlier this week showed Japan’s economy contracted for the first time in three months, mainly affected by the slowdown in China, while the country also remained in contraction.
The Japanese economy rose in the third quarter, giving the Bank of Japan more momentum to keep policy loose in the near term. While the central bank is expected to eventually move away from its ultra-dovish stance in 2024, the timing of this pivot remains highly uncertain, with Bank of Japan officials remaining hawkish on the issue.
The Bank of Japan recently indicated that Japanese inflation will trend slightly lower in the near term, but is expected to remain flat in fiscal 2024, trending above its 2% annual target for this year.
The bank also stressed that it is seeking further signs that inflation has reached the 2% level before considering ending its extremely cautious policies.
There was little reaction to Friday’s reading, as he did.