Japan inflation piles pressure on BoJ

tokyo — Japan’s consumer inflation was flat in the year to February as low energy costs and weak consumption put a lid on price growth, government data showed on Friday, keeping the central bank under pressure to top up stimulus although it eased policy less than two months ago.

A separate BoJ index calculated by the central bank to strip out the effects of energy and fresh food prices showed consumer inflation at 1.1 per cent in the year to February, unchanged from January.

The data reinforces a dominant market view that the Bank of Japan will be forced to cut its inflation forecasts and push back the timing for hitting its two per cent price target at a quarterly review of its projections next month.

“Japan won’t see inflation hit the BoJ’s target in the next few years,” said Koya Miyamae, senior economist at Nikko Securities.

“The BoJ is falling into a vicious cycle in which it remains under pressure for further easing even as it has few effective policy means available,” he said.

The government’s core consumer price growth calculation for Tokyo, considered a leading indicator of nationwide prices, marked the biggest annual drop in nearly three years in March, suggesting that inflation will remain subdued on weak demand as the world’s third-largest economy skirts recession.

Tokyo’s core consumer price index declined 0.3 per cent in the year to March, the first time it dropped by as much since April 2013.—