Japan’s Consumer Prices Fall 0.1% Before BOJ Decision

  • Second consecutive monthly decline in Japanese price trend
  • Effects of low oil prices continue to take toll on costs

The Bank of Japan’s main inflation gauge dropped for a second consecutive month as the effects of low oil prices continue to take a toll, keeping Governor Haruhiko Kuroda distant from his 2 percent inflation target.

Consumer prices excluding fresh food declined 0.1 percent in September from a year earlier, after falling in August for the first time since April 2013, according to the statistics bureau. The median estimate of economists surveyed by Bloomberg was for prices to decline 0.2 percent. Stripping out food and energy, prices rose 0.9 percent.

Analysts are split on whether the BOJ will bolster stimulus later Friday as board members examine the outlook for inflation and economic growth. Even though Japan’s core consumer prices are falling, Kuroda has said the inflation trend is improving, helped by a tight labor market and high corporate profits.

“There isn’t much momentum in inflation,” Yasuhiro Takahashi, an economist at Nomura Securities Co., said before the report. “Subdued inflation is making it tough for the BOJ to defend inaction.”

Household spending fell 0.4 percent in September while the jobless rate stood at 3.4 percent, according to separate reports by the statistics bureau.

“Today’s CPI report supports the BOJ’s argument that the price trend remains firm” with the rise in the data excluding energy, said Junko Nishioka, chief economist for Japan at Sumitomo Mitsui Banking Corp. in Tokyo. “There’s a high chance that the economy contracted in the third quarter,” because of weak consumption, she said.

She added: “The BOJ will probably have little choice but to take additional easing around January.”

While 16 of 36 analysts surveyed by Bloomberg said they expect Kuroda and his board to bolster monetary policy Friday, eight forecast further easing at a later date and 12 see no prospect of change in the foreseeable future.

Kuroda said Oct. 16 that the inflation trend is “surely improving” and cited a measure that excludes fresh food and energy, which rose 1.1 percent in August.

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