The core consumer price in Japanese capital rose 2.2% in February from the previous year, the data showed on Friday, slowing down for the first time in four months because the energy subsidies were revived but remained far above the target of 2% of the central bank.
Continuous high inflation is likely to support the case for the central bank to continue the monetary policy tightening campaign.
“The slowdown mainly reflects restored subsidies to curb electricity and gas bills, but the underlying trend has not changed with the remaining food prices,” said Kazutaka Maeda, an economist at the Meiji Yasuda Research Institute.
“This underlying trend will justify further tariff increases by BOJ,” he added.
Increasing the Core Consumer Price Index (CPI), which does not include the cost of fresh food that is volatile, slower than the median market estimate of 2.3% and an increase of 2.5% in January.
A separate index that eliminates the effect of the cost of fresh food and fuel, which is watched by BOJ as an indicator of a wider price trend, up 1.9% in February from the previous year, forward at the same speed as the previous month.
Tokyo inflation rate is considered as the main indicator of national trends.
The government in January returned electricity and gas subsidies, which were reflected in the bill this month.
The price pressure to the top can increase again in a few months because the government plans to delete subsidies at the end of March.
The price of food has also jumped in recent months, encouraging the government to order the release of rice which is buried to agricultural cooperatives to reduce costs.
The new yen strength can help reduce import costs, but usually requires a few months for the movement of foreign exchange rates to be reflected in prices.
Meanwhile, Tomoyuki Ota, head of economist at Mizuho Research & Technologies, noted that the price of non-public service had slowly increased.
“This shows that the cost of labor and higher energy has not been fully forwarded to the price,” he said.
Service prices in the non-public sector rose 0.8% years-to-year in February, slower than an increase of 0.9% in January.
Separate data from the Ministry of Economy, Trade and Industry show that the Japanese factory output fell 1.1% in January from the previous month, it was in line with the estimated median market for a decline of 1.2%.
Producers surveyed by the ministry expect a seasonal adjusted output to increase 5.0% in February and fall 2.0% in March.
Boj ended a decade of a massive monetary stimulus last year and raised the short-term interest rate to 0.5% from 0.25% in January with the view that Japan was on a sustainable peak reached the 2% inflation target.
Governor Boj Kazuo Ueda said the central bank would continue to raise interest rates if Japan made sustainable progress in reaching 2%inflation, solid wage growth and domestic demand.
Source: Reuters
