Japan inflation edges higher but BOJ still in a bind
(Adds economist's quote, details on BOJ policy)
* March nationwide core CPI up +0.8 pct yr/yr vs f'cast +0.7
* Core-core CPI rises 0.4 pct yr/yr in March
* Soft inflation to keep BOJ under pressure to keep stimulus
By Stanley White
TOKYO, April 19 (Reuters) - Japan's core inflation picked up
slightly in March from a year earlier, but remained distant from
the Bank of Japan's ambitious 2 percent target in a sign of
rising pressure on the central bank.
Over the past year, policymakers have had to contend with a
slowdown in global demand as the Sino-U.S. tariff war put a dent
in world trade and hit Japanese exporters. This has made the
Bank of Japan's task of generating inflation even more
Data on Friday showed a 0.8 percent increase in the
nationwide core consumer price index (CPI), which includes oil
products but excludes volatile fresh food costs, compared with a
median market forecast of 0.7 percent. In February, annual core
consumer inflation hit 0.7 percent.
An index the BOJ focuses on - the so-called core-core CPI
that strips away the effect of both volatile food and energy
costs - rose 0.4 percent in March, matching the annual increase
The central bank is in a bind. Years of heavy money printing
have dried up bond market liquidity and hurt commercial banks'
profits, stoking concerns that its massive easing programme is
"There simply isn't enough momentum toward 2 percent
inflation, because wages are not rising that much," said Hiroshi
Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley
"The BOJ became passive last year because it was worried
about banks' earnings. This year the BOJ could fine tune its
policy if other economic indicators worsen further."
Subdued inflation has left the BOJ well behind its
counterparts in dialling back stimulus, including the United
States where monetary policy had a bigger impact. Some
economists also argue the BOJ has little ammunition left to
fight another serious economic downturn.
There is also a growing view in markets that core consumer
inflation may grind to a halt in coming months as recent oil
price falls push down gas and electricity bills. Such a scenario
could put the central bank under pressure to come up with some
measures to buoy prices.
The BOJ is expected to forecast next week that inflation
will remain below its target through the fiscal year that ends
in March 2022, sources say.
At a two-day policy meeting ending April 25, the BOJ is
widely expected to maintain its pledge to guide short-term rates
at minus 0.1 percent and long-term yields around zero under a
policy dubbed yield curve control.
The BOJ has notched up its warning against the rising
drawbacks of its policy. In a semi-annual report analysing the
banking system on Wednesday, it said nearly 60 percent of
regional banks could suffer net losses a decade from now if
corporate borrowing keeps falling in line with the current
(Reporting by Stanley White; Editing by Kim Coghill)
First Published: 2019-04-19 01:35:55
Updated 2019-04-19 02:09:21
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