Japan April headline inflation fell for a second straight month, worsening further on decline in oil as well as goods prices. A depressed services sector also added to the downfall.
Headline inflation fell further to -0.3 pct y/y, from -0.1 pct in March, on the back of a 12.6 pct y/y drop in energy inflation. Consumer prices excluding fresh food fell 0.3 percent in April from a year earlier, after dropping by the same amount in March, according to a statistics bureau report on Friday. However, a Bloomberg survey had forecasted a 0.4 pct decline in the same.
“Japan’s inflation is going to remain weak,” said Takashi Shiono, Economist, Credit Suisse Group in Tokyo.
The economist further said that looking at economic and price fundamentals, it is expected that the Bank of Japan will soon ease policy, citing low energy prices as the key reason behind slumping price in food inflation.
The Bank of Japan Governor Kuroda is expected to inject further monetary stimulus in to the economy at the next meeting scheduled on June 15-16 on the backdrop on lack of price growth in the economy. However, the BoJ Governor had disappointed markets in April when he stood pat on economic stimuli.
“We expect job markets to be supported by tightening labor supply but lacklustre demand is likely to put a lid on wage growth, suggesting that the Bank of Japan's core inflation measure,” HSBC Global said in a research note.
Clearly, disinflationary pressures are mounting on Japan’s economy and will rise to record highs, should the Central Bank skip easing action in June.
“It’s necessary for wages to grow for Japan’s sustainable inflation,” Kuroda said in Parliament on Wednesday, acknowledging that Japan’s sustained inflation has not been sufficiently impressive. Japan’s average cash earnings did not rise 1 pct or higher in any month since 1997.
According to Yoshiki Shinke, economist at Dai-ichi Life Research Institute, Japan’s timid growth is unlikely to spur inflationary tinge in the country as he sees a strong possibility of another contraction this quarter.
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