Ja­pan in­fla­tion falls back to zero in Jan­uary: Govt

The Pak Banker - - MARKETS/SPORTS -

Ja­pan's in­fla­tion rate fell to zero in Jan­uary, govern­ment data showed on Fri­day, in an­other blow to Prime Min­is­ter Shinzo Abe's three-year at­tempt to put an end to a years-long bat­tle with fall­ing prices.

Ja­pan has suf­fered de­fla­tion -- a de­bil­i­tat­ing drop in prices -off and on since the late 1990s and au­thor­i­ties have in­tro­duced var­i­ous poli­cies to fight it, in­clud­ing record low cen­tral bank in­ter­est rates.

Abe came to power in late 2012 vow­ing to fix the prob­lem for good through an ar­ray of poli­cies dubbed "Abe­nomics" that in­clude govern­ment spend­ing and a mas­sive cen­tral bank bond-buy­ing pro­gramme. The govern­ment's in­ter­nal affairs min­istry an­nounced that Ja­pan's growth in core con­sumer prices, which ex­clude volatile fresh food prices, was un­changed in Jan­uary from a year ago af­ter two months of tepid 0.1 per­cent growth. Fall­ing oil prices -re­source-poor Ja­pan is a ma­jor en­ergy im­porter -- and a re­cent rise in the value of the Ja­panese yen are seen as fur­ther ham­per­ing ef­forts to achieve mod­er­ate price growth.

The lat­est fig­ure un­der­scores Abe's chal­lenge with the out­look be­ing for fur­ther price weak­ness.

"In light of fall­ing im­port prices and slug­gish eco­nomic ac­tiv­ity, we think that the slow­down in un­der­ly­ing in­fla­tion has fur­ther to run," said Mar­cel Thieliant, se­nior Ja­pan econ­o­mist at Cap­i­tal Eco­nom­ics.

While of­fer­ing pro-busi­ness poli­cies, Abe has also pushed Ja­pan Inc to share prof­its with con­sumers via wage hikes, say­ing such a move would be key to boost­ing con­sump­tion, prices and over­all growth.

De­spite in­cen­tives, Ja­panese busi­nesses have re­mained cau­tious to in­vest in their ven­tures and of­fer mean­ing­ful wage in­creases, cit­ing the un­cer­tain eco­nomic out­look.

Last month, the govern­ment said Ja­pan's in­fla­tion rate stood at 0.5 per­cent in 2015, far short of the 2.0 per­cent tar­get that the BoJ had promised to achieve by early last year.

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