Thursday, March 21, 2019 - 20:15

MNI POLICY: Japan Feb CPI Rise Slows; BOJ Caution Intact

--Japan Core CPI Up 0.7% y/y In February Vs. +0.8% in January

TOKYO (MNI) - The Bank of Japan's outlook on prices remains cautious as the latest data confirmed the country remains locked in a low inflation environment.

Japan's nationwide core consumer price index rose 0.7% on year in February, decelerating from 0.8% in January. Core CPI rise was expected to come in at +0.8% on year (vs. +0.8% in Jan), in line with the Tokyo core CPI -- a leading indicator for the nationwide number -- which had risen at the same pace as seen in January.

February's positive contribution from energy prices was 0.34 percentage point, slowing from 0.37 percentage point in January and 0.45 percentage point in December and BOJ officials see it slowing further in the months ahead.

The February data continued to indicate that inflation remains stubbornly slow in responding to a sustainable economic expansion and tight labor market conditions, with firms still cautious over raising their retail prices, despite higher energy and labor costs.

Despite the slowing core CPI rise, BOJ officials maintain the view that Japan's inflation rate is expected to gradually rise as food and drink companies at least have announced a raise in their retail prices from April, the beginning of the new fiscal year. Those officials will now focus on the annual corporate price revisions in April.

Goods prices excluding volatile fresh food prices rose 1.1% on year in February, with the pace of increase unchanged from January's 1.1% gain. Overall goods prices were unchanged at -0.1%.

Prices for processed food (canned food, bread, snacks, beverages, etc.), which accounts for 15% of the total CPI that BOJ officials are focused, rose 0.5% on year, unchanged from a 0.5% gain in the previous month.

Prices for eating out rose 1.0% on year in February, after rising 1.1% in January, indicating that upward pressure on the service prices from higher labor and material costs continues, but hasn't picked up.

BOJ economists will continue to watch how weaker prices lower the expected inflation rate, which have been more or less unchanged in recent months.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
--MNI London Bureau; tel: +44 203-586-2225; email:


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