- Kyohei Morita, chief Japan economist at Barclays Capital
It should be a welcoming week for Haruhiko Kuroda, who is desperate in achieving the 2% inflation target. Therefore, the latest report from Statistics Bureau, should be highly welcomed by the central, as consumer prices soared at their fastest pace in 23 years in April, following a tax hike in the same month. After a release of the data the greenback lost 0.17% against the Yen, buying 101.61.
A core measure of inflation, which strips outs the price of fresh fruit, soared 3.2% on a yearly basis in April, accelerating from 1.3% a month earlier and beating analysts' expectations for a 3.1% gain. Another measure, which excludes both fresh fruit and energy, climbed 2.3% over the same period, in line with forecasts. The worrying sign, however, is a 4.6% year-on-year drop in household spending. The figure was worse than the market consensus of a 3.4% decline. Nevertheless, it comes following a 7.2% surge in consumption a month earlier ahead of the tax hike. Separately, reports showed the unemployment remained around a seven-year low of 3.6%, while industrial production plunged 2.5%.
Central bank's officials have been surprisingly confident in achieving the target of 2% by next year, even without adding more stimulus, citing a tightening in the labour market as the main driver of inflation even amid slowing growth.
© Dukascopy Bank SA