Bank of Japan Maintains Negative Interest Rate
Bank of Japan.

JAKARTA (TheInsiderStories) – Statistics Japan shows that the country’ annual inflation lowered to 0.7 percent in February from 0.8 percent in a month earlier. The figure below the Bank of Japan’ (BoJ) target of 2.0 per cent.

On a monthly basis, consumer prices were flat in February from previous month 0.3 percent, data showed on Friday (03/22). The data shows Japan’ inflation stood at 0.2 per cent year-on-year (YoY) in February 2019, unchanged from the previous month’ 15-month low figure but below market expectations of 0.3 per cent.

Both prices of food and transport fell for the third month in a row, while the cost of housing was flat after declining for 34 consecutive months. On a monthly basis, consumer prices were flat in February, after a 0.3 percent rise in January.

In average, inflation rate in Japan stood at 2.98 percent from 1958 until 2019, reaching an all-time high of 24.90 percent in February of 1974 and a record low of -2.50 percent in October of 2009.

Prices of food dropped by 1.4 percent year-on-year in February, after a 1.5 per cent fall in January and marking the third straight month of declines. Among food, cost continued to fall for vegetables and seaweeds (-15 percent vs -14.4 percent), of which fresh vegetables (-22.2 percent vs -21.2 percent); fruits (-1 percent vs -2.7 percent), of which fresh fruits (-1.4 percent vs -3.3 percent); and oils, fats & seasonings (-0.4 percent vs -0.6 percent).

In addition, inflation slowed for dairy products and eggs (2.4 percent vs 2.8 percent), meals outside the home (1 percent vs 1.1 percent), while was steady for cereals (at 0.7 percent). Meantime, cost rose faster for fish & seafood (1.6 percent vs 1.5 percent), of which fresh fish & seafood (0.6 percent vs 0.5 percent), cooked food (0.4 percent vs 0.1 percent), and meat (0.4 percent vs 0.3 percent).

At the same time, the cost of transportation and communication declined for the third consecutive month (-0.6 percent vs -0.2 percent). In contrast, inflation was steady for miscellaneous goods and services (at 0.9 percent), while prices slowed for culture and recreation (1.4 percent vs 1.5 percent), medical care (1.2 percent vs 1.3 percent); and education (0.4 percent vs 0.5 percent).

Meantime, cost went up slightly faster for fuel, light and water charges (5.3 percent vs 5.2 percent), of which electricity (7.7 percent vs 7.2 percent) and gas (6.2 percent vs 5.6 percent), while prices were unchanged for housing (vs -0.1 per cent in January); clothes & footwear (vs 0.2 percent); and furniture and household utensils (vs-0.1 percent in January).

The price data underscores the fragile nature of Japan’s economic recovery, as escalating China-United States (US) trade frictions and slowing Chinese growth weighs on exports and business sentiment.

The BoJ faces a dilemma. Years of heavy money printing have dried up market liquidity and hurt commercial banks’ profits, stoking concerns over the rising risks of prolonged easing.

And yet, subdued inflation has left the BoJ well behind its US and European counterparts in dialing back crisis-mode policies, and with a dearth of ammunition to battle an abrupt yen spike that could derail an export-driven economic recovery.

Some analysts say core consumer inflation may grind to a halt in coming months as recent oil price falls push down gas and electricity bills, which could put the BOJ under pressure to ramp up an already massive stimulus programme.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com

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