Japan’s Key Consumer Price Gauge Falls Most Since 2013

Breaking Down Japan's CPI, Factory Output Data

Consumer prices in Japan dropped more than expected, adding to evidence that the nation is struggling to break free of deflation as the central bank board meets to decide whether to expand monetary stimulus.

QuickTake Abenomics

Prices excluding fresh food slumped 0.3 percent in March from a year earlier, the most since April 2013, the statistics bureau announced. That compares with a forecast drop of 0.2 percent in a Bloomberg survey. Excluding food and energy costs, inflation was 0.7 percent.

The inflation figures are some of the most important data for the Bank of Japan to gauge the impact of its monetary expansion program. Policymakers have been waiting on the slew of economic indicators being released Thursday before making any decision to adjust stimulus, according to people familiar with discussions at the bank.

The BOJ’s core price measure “will likely stay near zero or fall in the coming months because of downward pressure from declines in energy costs,” Hiroaki Muto, chief economist at Tokai Tokyo Research Center, said before the release. “It’s very difficult to see the inflation rate reaching the 2 percent price goal by the end of the next fiscal year.”

The next fiscal year ends in March 2018, and Governor Haruhiko Kuroda’s five-year term ends in April of that year.

Muto said it’s getting harder for Kuroda to keep saying that the price trend is improving, adding that pressure is building on the BOJ to ease monetary policy further.

It’s also likely that food inflation has peaked, according to a research note from JPMorgan Securities economist Masamichi Adachi, who was writing before the data was released.

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