Without Energy's Drag, Inflation in Japan Is Approaching Target

  • Oil's 36 percent decline this year holds down price gains
  • Central bank putting more focus on CPI that excludes energy

Prices rose more than 1 percent for a fourth month in Japan in November, according to an index that the Bank of Japan is emphasizing as it attempts to reach its 2 percent inflation goal.

Inflation was 1.2 percent in November compared with a year earlier, according to a consumer price index the BOJ released Friday in Tokyo that excludes fresh food and energy. The central bank calculates the number, basing it on the government’s data. Core CPI, which includes energy costs, rose 0.1 percent in the same period, data released earlier Friday showed.

The BOJ forecasts that its goal to combat deflation and reach the 2 percent price target will be reached around the six months through March 2017, and the price trend is continuing to improve, Governor Haruhiko Kuroda said earlier this month. The timing of reaching the target depends on what happens with oil prices, Kuroda said.

“The BOJ continues to blame oil for delaying inflation,” Masaki Kuwahara, an economist at Nomura Holdings Inc. in Tokyo, said after the data was released. It will be difficult for inflation excluding energy prices to rise significantly, he said.

Explaining the underlying price trend using CPI data that excludes energy is appropriate, some members of the BOJ board said at the November policy meeting, according to the minutes released this week. Over the past year, Brent, the benchmark for more than half the world’s crude, has declined more than 36 percent, dragging down inflation around the world, including in Japan. 

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