Japan consumer inflation rises 0.3 pct in 2016, misses market expectations

Japanese consumer prices rose 0.3 percent on year in December, comes above the market expectations of 0.2 percent growth, down from prior 0.5 percent, the Ministry of Internal Affairs and Communications said on Friday.

Also, core consumer prices (ex-food), declined an annual 0.2 percent, beats forecast of -0.3 percent fall following the 0.4 percent contraction a month earlier. Overall consumer inflation for the Tokyo region, considered a leading indicator for the nationwide trend, added 0.1 percent on year in January versus expectations for a flat reading - which would have been unchanged.

Also, the BoJ’s consumer inflation rose by 0.1 percent in December. This came in as expected but lower than Novembers 0.2 percent rise. The BOJ began publishing its own consumer price calculations in November 2015 to better understand the underlying price trend. Its index strips away volatile fresh food and energy, but includes processed and imported food prices.

Moreover, a weaker yen and pickup in oil prices are likely to spur inflation this year, though questions remain on whether the expected gains in CPI will be sustainable, given the poor growth in wages and lacklustre consumer spending, reported Bloomberg.

Lastly, the Bank of Japan’s (BoJ) first 2-day monetary policy meeting 2017, scheduled to be held on January 30-31. Lastly, we foresee that the central bank will remain committed to holding its 10-year JGB yields near zero, while keeping interest rate steady at -0.10 percent.