Japan’s Inflation Slows for a Second Month in Blow to BOJ By Bloomberg

© Bloomberg. People walk past stores in the Shinjuku District of Tokyo, Japan, on Saturday, April 14, 2018. Japan’s headline inflation measure is expected to rise to 1.1 percent this year and in 2019, from 0.5 percent in 2017, the International Monetary Fund said in its World Economic Outlook on Tuesday. Photographer: James Whitlow Delano/Bloomberg

(Bloomberg) — The Bank of Japan’s key inflation gauge showed that price gains slowed for a second straight month in April, underscoring the central bank’s struggles to hit its 2 percent inflation target.

Key Takeaways

The latest fall in the BOJ’s key inflation gauge will likely heighten questions about the sustainability of its stimulus program, which is widely thought to be both at the limits of its powers and producing diminishing returns. Still, private economists are pushing back their forecasts for when the BOJ will begin tightening policy. Key factors going forward will be oil prices and the yen’s exchange rate.

Economist Views

  • “Oil prices are rising and so CPI may pick up again down the road, but prices excluding oil continue to be very steady,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. “The overall upward momentum of prices is pretty weak and that means that the BOJ will have to maintain the current policy.”
  • “There is no sign of momentum gathering in Japan’s inflation,” Norio Miyagawa, a senior economist at Mizuho Securities Co. “It’s weak data, showing that households remain in saving mode and companies aren’t confident enough to raise prices against their competition.”
  • “The BOJ has done so much and yet they are producing few results with inflation,” Miyagawa said. “That makes it even clearer that Japan really needs a growth strategy and structural reforms for inflation.”

(Adds details, economists’ comments.)

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