Japanese inflation has fallen further below the Bank of Japan’s (BoJ) 2% annual target, underlining the struggle to muster any price pressures despite super-loose monetary policy settings.
According to the Japanese government, core inflation which excludes fresh food prices rose by just 0.7% in the year to April, below the 0.9% pace seen in March and forecasts for a smaller deceleration to 0.8%.
It currently sits at the lowest level since September 2017, and off the recent cyclical high of 1% set in February.
Excluding both fresh food and energy prices, referred to as core-core inflation, prices rose by a smaller 0.4% over the year, although that was up from 0.4% in March.
Headline inflation fell heavily, rising at an annual pace of 0.6%, down from 1.1% a month earlier.
From the end of 2016, the Japanese yen has strengthened by over 5% against the US dollar, contributing to the weakness in inflationary pressures.
Last month, the BoJ said it will persist with its quantitative and qualitative easing (QQE) with yield curve control program, buying Japanese government bonds (JGBs) so that 10-year yields are anchored at around 0%, for as long as necessary until inflation stays above its 2% inflation target in a “stable manner”.
It refrained on offering a view on when inflation will reach its target, simply noting that the “projected rates of increase in the CPI are more or less unchanged”.
It previously stated that “the timing of the year-on-year rate of change in the CPI reaching around 2% will likely be around fiscal 2019”.
On current form, it could be some time yet.
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