TOKYO: Japanese inflation stalled in February with a key measure of prices flat for the first time in nearly two years, data showed Friday, weighed by a plunge in oil rates and tepid consumer spending.
The dismal figures come after Bank of Japan chief Haruhiko Kuroda acknowledged this month that dragging the country out of years of deflation was proving to be "very challenging", and he warned that inflation may temporarily fall to zero.
While core inflation, excluding volatile fresh food prices, rose 2.0 percent in February, a measure that strips out the impact of a sales tax rise last year -- which is the BoJ's benchmark -- came in flat from a year ago.
The reading was far short of the bank's goal of sustained 2.0 percent inflation and marks the first month of zero growth since May 2013, just after Tokyo launched a high-profile bid to kickstart the economy and conquer deflation.
Inflation is a key measure of Prime Minister Shinzo Abe's plan to end years of stagnant or falling prices that have been blamed for holding back growth in the world's number three economy.
Prices had been on the rise after the programme was launched, largely due to Japan's heavy post-Fukushima energy bills as it turned to pricey fossil fuel alternatives following the atomic accident.
The so-called Abenomics growth blitz -- including big government spending and massive central bank monetary easing -- helped pull down the yen, which in turn pushed up import costs.
But oil prices have tumbled since the summer and consumers snapped their wallets shut after the government raised sales taxes to 8.0 percent from 5.0 percent in April to help pay down Japan's enormous national debt.
Doubts are growing over what many see as an overly ambitious inflation target -- even among policymakers themselves.
Minutes from the central bank's January meeting showed that three of nine BoJ board members doubted the chances of reaching the price target.
Separate data Friday showed spending among Japanese households dropped for the 11th month in a row, although the 2.9 percent decline in February from a year earlier was smaller than the 5.1 percent fall in January.
The unemployment rate edged down to 3.5 percent in February from 3.6 percent a month earlier.
Following annual labour talks, many companies have responded to Abe's call to boost wages, which he sees as crucial to putting more money in workers' pockets and driving up spending.
But a majority of economists surveyed by Bloomberg News this month expect another round of easing by October, even as the economy crept out of a brief recession in the last quarter of 2014.
"The plunge in oil will keep capping gains in consumer prices," said Takeshi Minami, an economist at Norinchukin Research Institute.
SMBC Nikko Securities added that the central bank would have little choice but to "carry on with the (easing) policy until the actual inflation rate rises".
Comments
Comments are closed.