Japan’s key gauge of inflation dropped to its lowest level since 2017, the latest indication of the difficulty faced by the Bank of Japan (BOJ) in generating price growth as speculation grows that it might add to its stimulus as early as next month.
Consumer prices excluding fresh food rose 0.5 percent last month from a year earlier, matching economists’ median estimate, the Japanese Ministry of Internal Affairs said.
A drop in energy prices was the biggest factor in the slowdown, it said.
Japan’s key inflation gauge has not risen above 1 percent in years and is expected to remain subdued in the next few months as education costs weigh on prices.
Bank of Japan Governor Haruhiko Kuroda on Thursday ordered a review to see if developments overseas have the potential to kill off momentum in Japanese prices toward the bank’s 2 percent target.
Compared with a month ago, Kuroda said he is now “more inclined” to go ahead with easing.
Energy prices, which have been contributing less to price gains since October last year, fell overall for the first time since January 2017.
Stripping out the effects of a drop in energy costs, last month’s inflation data might leave room for the central bank to argue that prices are actually moving in the right direction. Consumer prices excluding fresh food and energy rose 0.6 percent last month, exceeding economists’ forecasts for a 0.5 percent gain and above last year’s average pace of 0.4 percent.
“The BOJ will probably want to say price momentum is still upward, but they’ve already been pushed into a corner by price and economic data and will have to think about additional easing,” said Hiroshi Miyazaki, a senior economist at Mitsubishi UFJ Morgan Stanley in Tokyo.
A 2 percentage point sales tax hike that is to come into effect next month presents another risk that the bank will have to manage.
The previous increase to the tax in 2014 triggered a contraction of more than 7 percent the following quarter. Consumer spending has been supporting economic growth during an exports slump this year.
“Any pickup toward the 2 percent target is going to take a long time. We think the Bank of Japan will need to prepare for a longer-term effort to stoke consumer prices with a more flexible operational approach to its stimulus,” Bloomberg economist Yuki Masujima said.
Overall consumer prices rose 0.3 percent last month, matching economists’ median forecast. A 0.2 percent drop in hotel rates also weighed on inflation.
Separately, the central bank trimmed its bond purchases in a regular operation, a day after Kuroda said he would like to see a steeper yield curve.
Ten-year bond yields ticked up toward the bottom of the bank’s preferred range of plus or minus-0.2 percent.
With an approval rating of just two percent, Peruvian President Dina Boluarte might be the world’s most unpopular leader, according to pollsters. Protests greeted her rise to power 29 months ago, and have marked her entire term — joined by assorted scandals, investigations, controversies and a surge in gang violence. The 63-year-old is the target of a dozen probes, including for her alleged failure to declare gifts of luxury jewels and watches, a scandal inevitably dubbed “Rolexgate.” She is also under the microscope for a two-week undeclared absence for nose surgery — which she insists was medical, not cosmetic — and is
CAUTIOUS RECOVERY: While the manufacturing sector returned to growth amid the US-China trade truce, firms remain wary as uncertainty clouds the outlook, the CIER said The local manufacturing sector returned to expansion last month, as the official purchasing managers’ index (PMI) rose 2.1 points to 51.0, driven by a temporary easing in US-China trade tensions, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. The PMI gauges the health of the manufacturing industry, with readings above 50 indicating expansion and those below 50 signaling contraction. “Firms are not as pessimistic as they were in April, but they remain far from optimistic,” CIER president Lien Hsien-ming (連賢明) said at a news conference. The full impact of US tariff decisions is unlikely to become clear until later this month
GROWING CONCERN: Some senior Trump administration officials opposed the UAE expansion over fears that another TSMC project could jeopardize its US investment Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is evaluating building an advanced production facility in the United Arab Emirates (UAE) and has discussed the possibility with officials in US President Donald Trump’s administration, people familiar with the matter said, in a potentially major bet on the Middle East that would only come to fruition with Washington’s approval. The company has had multiple meetings in the past few months with US Special Envoy to the Middle East Steve Witkoff and officials from MGX, an influential investment vehicle overseen by the UAE president’s brother, the people said. The conversations are a continuation of talks that
CHIP DUTIES: TSMC said it voiced its concerns to Washington about tariffs, telling the US commerce department that it wants ‘fair treatment’ to protect its competitiveness Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday reiterated robust business prospects for this year as strong artificial intelligence (AI) chip demand from Nvidia Corp and other customers would absorb the impacts of US tariffs. “The impact of tariffs would be indirect, as the custom tax is the importers’ responsibility, not the exporters,” TSMC chairman and chief executive officer C.C. Wei (魏哲家) said at the chipmaker’s annual shareholders’ meeting in Hsinchu City. TSMC’s business could be affected if people become reluctant to buy electronics due to inflated prices, Wei said. In addition, the chipmaker has voiced its concern to the US Department of Commerce
RSS