"Companies are still far from raising prices, and consumers won't accept it as their deflationary expectations linger"
- Azusa Kato, an economist at BNP Paribas SA
Consumer prices in the world's third largest economy dropped for the eighth time in nine months, highlighting the challenges facing the Bank of Japan in reaching its ambitious 2% target level. According to the Japan's Statistics Bureau, consumer prices, excluding fresh food, tumbled 0.2% in January on an annual basis, while the so-called core-core price index, which excludes food and energy and is similar to the core index used in the U.S., fell an annual 0.7%, faster than a 0.6% decline in the year to December. While the depreciation of the Japanese Yen improved the outlook for exporters and pushed up the prices of imported energy and commodities, weak inflation is adding more pressure on the central bank and the government to introduce more bold measures to boost flagging economy.
"Companies are still far from raising prices, and consumers won't accept it as their deflationary expectations linger," said Azusa Kato, an economist at BNP Paribas SA in Tokyo. "There is a considerable time lag for an economic recovery to start feeding into prices."
"Price declines could narrow from the summer as the economy recovers and as the cost of utilities rise," said Yusuke Ichikawa, economist at Mizuho Research Institute.
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