Japan’s core consumer prices rose for the first time in five months in November, but household spending tumbled, casting doubt on the central bank’s view that robust consumption will help accelerate inflation to its 2% target.
The mixed batch of data will keep alive expectations that BOJ Governor Haruhiko Kuroda, who has said he will do whatever it takes to achieve his ambitious price goal, may nudge the central bank into expanding stimulus as early as next month, CNBC reported.
“The downward pressure from falling oil prices seems to have run its course, which helped core CPI rise,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.
“But consumer prices likely won’t rise as fast as the BOJ projects. We expect the central bank to ease next year.”
The core consumer price index, which includes oil products but excludes volatile fresh food prices, rose 0.1% in November from a year earlier, against a median market forecast for a flat reading, data showed on Friday.
The rise followed a 0.1% drop in October and came as higher food prices moderated the pressure from slumping energy costs, offering some relief to the BOJ as it struggles to hit its ambitious price target.
But household spending suffered the biggest annual fall in eight months, down 2.9% in November from a year earlier, more than a median forecast for a 2.4% decline.
The government downgraded its assessment to say household spending was weak, compared with the previous month’s view that it was moving sideways, underscoring the fragile state of the economy which narrowly dodged recession in the July-September quarter.
Consumers spent less on electronic goods and cars, while warm weather during the month hurt sales of winter clothing and heating equipment, the data showed.
Wary of soft growth, the government plans nearly $800 billion in record spending in next fiscal year’s budget.
The BOJ also fine-tuned its stimulus program last week to ensure it can keep up or even accelerate its money-printing to achieve its inflation target.
Policymakers are hoping a tightening job market will gradually nudge firms into accelerating wage hikes and underpin household spending. But repeated calls from Prime Minister Shinzo Abe to boost wages have so far fallen on deaf ears.
The BOJ, which sees wage hikes as key to achieving its inflation target, will conduct a nationwide poll on corporate wage plans that will be released on Jan. 18.
