BREAKING NEWS

BREAKING NEWS

Tokyo inflation picks up but BOJ's price target remains distant

Tokyo inflation picks up but BOJ's price target remains distant
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ISSEI KATO(Reuters)
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TOKYO (Reuters) - Tokyo's core consumer price inflation picked up slightly more than expected in January due to higher energy prices, but Japan's central bank still has a long way to achieve its elusive 2 percent inflation target.

The Bank of Japan on Wednesday cut its consumer inflation forecasts and maintained its massive stimulus programme, with Governor Haruhiko Kuroda warning of growing risks to the economy from protectionism and faltering demand.

Core consumer prices in Tokyo, a leading indicator of nationwide price trends, rose 1.1 percent in January from a year earlier, government data showed on Friday.

The rise in the core consumer price index for Japan's capital, which includes oil products but excludes fresh food prices, compared with the median estimate of a 0.9 percent increase in a Reuters poll of economists.

"Prices of electricity and gas boosted the Tokyo's core CPI but they are likely to start weakening from around spring reflecting falls in prices of natural gas and oil," said Takeshi Minami, chief economist at Norinchukin Research Institute.

"We expect Tokyo's core CPI will hover around 1 percent in the next few months but after that, it will likely start slowing down," he said, adding the BOJ is expected to continue its stimulus policy to reach its price target.

The BOJ on Wednesday downgraded its forecast for core consumer inflation to 0.9 percent in the coming fiscal year from 1.4 percent projected last October, reflecting slumping oil prices.

The so-called core-core CPI, which strips away the effect of both energy and fresh food prices, rose 0.7 percent in January after a 0.6 percent gain in December.

Tokyo's overall CPI rose 0.4 percent in January from a year earlier, the same pace as last month, data showed.

Japan's economy contracted in the third quarter last year and some economists suspect any rebound in October-December may be limited given global trade protectionism and cooling foreign demand.

Analysts say recession risks to the Japanese economy have grown. [ECILT/JP]

However, despite rising risks, the BOJ this week kept its view that Japan's economy will continue to expand at a modest pace.

Many BOJ policymakers are wary of adding even more stimulus, though external shocks could force the central bank to pull the trigger if the economy is at risk of a sharp deterioration.

(Reporting by Ritsuko Shimizu and Kaori Kaneko; Editing by Chang-Ran Kim & Kim Coghill)

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