Japan Consumer Prices Slide a Fifth Month as BOJ Set to Meet

Japan Consumer Prices Fall for Fifth Month as Price Goal Elusive
Today’s data will fuel political pressure on the BOJ to expand monetary easing to help defeat deflation. Photographer: Noriko Hayashi/Bloomberg

Japan’s consumer prices fell for a fifth month in September amid speculation the Bank of Japan will revise down inflation forecasts next week as it struggles to end deflation and spur growth.

Prices excluding fresh food declined 0.1 percent from a year earlier, the statistics bureau reported in Tokyo today. The median of 27 estimates in a Bloomberg News survey was for a 0.2 percent drop.

Today’s data fuel political pressure on the BOJ to expand monetary easing at a meeting on Oct. 30, as the world’s third-biggest economy risks contracting and a stand-off in parliament restrains fiscal measures. The government may announce limited support steps today after Finance Minister Koriki Jojima said last week that cabinet may authorize the use of reserve funds.

“We will probably have to wait until fiscal 2015 to see the end of deflation,” said Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo. “Japan’s economy is weakening and it warrants further easing by the BOJ.”

Energy costs limited overall price falls, Maruyama said.

The yen traded at 80.21 per dollar at 9:03 a.m. in Tokyo after earlier touching 80.38, the weakest since June 25. It has lost 1.1 percent this week, poised for the biggest five-day slide since the period ended Aug. 17.

The central bank is likely to forecast next week that it will not achieve its 1 percent inflation goal in fiscal 2014, according to people familiar with the matter.

Political Pressure

Some lawmakers see the central bank’s actions as insufficient. Shinzo Abe, leader of the main opposition Liberal Democratic Party, has called for a 3 percent inflation target, while Economy Minister Seiji Maehara is pressing for more easing to spur growth and defeat deflation. This month he became the first minister to attend a BOJ meeting in nearly a decade, according to the bank.

The opposition’s refusal to approve a bill that would allow borrowing to cover this year’s budget deficit is limiting room for fiscal maneuver to revive an economy hit by plummeting exports amid a territorial spat with China. Jojima said last week that the government will run out of money by the end of November without the bill’s passage.

The Ministry of Finance will meet with so-called primary dealers of the government’s debt today to discuss the delayed passage of a deficit-financing bill and its impact on the bond market.

The central bank meets next week after holding off on Oct. 5 from expanding its 55-trillion yen ($686 billion) asset-purchase fund, its main policy tool amid near-zero interest rates.

“The BOJ will want to avoid being seen as lacking policies to reach its 1 percent inflation goal” if the forecast for fiscal 2014 is lower than 1 percent, Naohiko Baba, chief economist at Goldman Sachs Group Inc. in Tokyo and former Bank of Japan analyst, wrote Oct. 24 in an e-mailed report.

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