Japan Inflation


Overall inflation records flat reading in December

In December, the core consumer price index, which excludes fresh food, remained flat over the previous month. The reading came in a notch above November's 0.1% price drop and market expectations. The flat figure was the result of higher prices for transportation and energy, which were offset by price drops in all other categories. Annual core inflation inched up from minus 0.5% in November to minus 0.4%. Meanwhile, amid a sharp decrease in fresh food prices (-4.3% month-on-month), the overall consumer price index dropped 0.3% over the previous month. The subdued figure drove annual inflation from 0.1% in November to a flat reading in December. As a result, annual average inflation closed the year at minus 0.7%. The Bank of Japan (BoJ) expects the economy to exit deflation in the fiscal year ending in March 2012, and recently raised its forecast for average inflation to 1.0%. For the fiscal year 2012, the Bank anticipates inflation to moderate to 0.7%, which is below the 1.0% considered price stability by the BoJ.


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