- Hiroshi Watanabe, senior economist at SMBC Nikko Securities
Japan's annualized core inflation cooled for a fourth consecutive month in November due to falling oil prices, underscoring challenges the Bank of Japan faces in reaching the 2% inflation goal. Factory production unexpectedly dropped, while real wages posted the sharpest decline in five years. The core consumer price index, which strips out volatile fresh food but includes oil products, climbed 2.7% in November from the previous year. Excluding the effects of a sales tax increase in April, core consumer inflation was 0.7%, falling from 0.9% in October and far below the BoJ's 2% target. Industrial production declined 0.6%, however, manufacturers expect output to increase 3.2% in December and rise 5.7% in the beginning of 2015.
The BoJ Governor Haruhiko Kuroda said that recent drops in oil prices would be beneficial for the Japanese economy and would help to accelerate inflation in the long term. Kuroda underlined that while oil price declines weigh on overall prices in the short term, they will help to boost corporate profits and allow companies to increase wages. On top of that, minutes of the November meeting of the BoJ showed that board members urged the government to "steadily promote measures aimed at establishing a sustainable fiscal structure."
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