Consumer prices excluding fresh food fell 0.2 percent in January from a year earlier, the third-straight decline, the statistics bureau said in Tokyo today. The result matched the median estimate in a survey of 26 economists by Bloomberg News.
While a weaker yen improves the outlook for exporters and pushes up the prices of imported energy and commodities, continued price falls show the scale of the BOJ’s challenge in achieving 2 percent inflation. Prime Minister Shinzo Abe yesterday nominated Asian Development Bank President Haruhiko Kuroda to lead the BOJ, with the prospective governor saying last month that more easing is justified for 2013.
“Companies are still far from raising prices, and consumers won’t accept it as their deflationary expectations linger,” said Azusa Kato, an economist at BNP Paribas SA in Tokyo. “There is a considerable time lag for an economic recovery to start feeding into prices.”
The BOJ will likely announce new stimulus measures as early as the first meeting under the new governor on April 3-4, Kato said. Current governor Masaaki Shirakawa and his two deputies step down on March 19.
Japan’s economy will grow 1.8% this quarter according to the median estimate of economists surveyed by Bloomberg News, after contracting in April-to-December last year. Goldman Sachs Inc. in January raised its GDP forecast for the fiscal year starting in April to 2 percent.
The nation’s trade deficit swelled to a record in January on energy imports and a weaker yen.
BNP’s Kato expects Japan’s consumer prices will start rising from the end of this year.
“Prices will remain non-reactive to the economy’s improvement stubbornly for the time being, but once they ignite, the gains will gather momentum,” Kato said.
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