BoJ’s sees low chance of beat­ing de­fla­tion in 2011

The Pak Banker - - Front Page -

TOKYO: Bank of Ja­pan board mem­ber Miyako Suda said the nation prob­a­bly won't over­come de­fla­tion in the year start­ing April, an out­look that con­flicts with the cen­tral bank's fore­cast of mod­er­ate in­fla­tion in the year.

"Chances of over­com­ing neg­a­tive core con­sumer prices in the next fis­cal year aren't high," Suda said in a speech in Ya­m­a­gata, north­ern Ja­pan, to­day, re­fer­ring to the 12 months start­ing April. "It will take a while to beat de­fla­tion."

Suda, the board's longest­serv­ing mem­ber whose term ex­pires in March, re­frained from of­fer­ing any pro­pos­als to beat more than a decade of price de­clines. The cen­tral bank in Oc­to­ber cut its in­ter­est rates to close to zero and cre­ated a 5 tril­lion-yen ($60 bil­lion) fund to buy govern­ment and cor­po­rate debt as well as riskier in­stru­ments in­clud­ing ex­change-traded funds.

"Given that Suda is a rel­a­tively hawk­ish mem­ber of the board, the fact she said prices will keep fall­ing sug­gests the BOJ may de­lay end­ing its com­pre­hen­sive eas­ing pro­gram," said Naoki Iizuka, a se­nior econ­o­mist at Mizuho Se­cu­ri­ties Co. in Tokyo. "There's no way the con­di­tions nec­es­sary for price in­creases will be set in fis­cal 2011."

Suda is the first board mem­ber to in­di­cate de­fla­tion may linger be­yond next year since the BOJ pol­icy board fore­cast in Oc­to­ber that core con­sumer prices will rise 0.1 per­cent in fis­cal 2011. Prices by that mea­sure, which ex­cludes fresh food, fell 0.6 per­cent in Oc­to­ber, the 20th straight drop.

The re­bas­ing of the price in­dex next Au­gust also low­ers chances of over­com­ing price de­clines, Suda said.

The statis­tics bureau will reshuf­fle the bas­ket of goods used to mea­sure CPI, a move that Gold­man Sachs Group Inc. es­ti­mates may lower the in­fla­tion rate by 0.4 per­cent­age point.

Suda said that risks for the econ­omy may linger as the yen's ad­vance against the dol­lar clouds the out­look for growth. -PB News

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