- Chris Williamson, economist at research firm Markit
Japan's consumer price inflation continued to slide in January, increasing the likelihood that the Bank of Japan could deploy extra monetary stimulus, including lowering interest rates further into negative territory. The core consumer price index, which includes oil but strips out volatile fresh food prices, was unchanged from a year earlier, after climbing 0.1% in the previous two months. Core consumer prices in Tokyo, a leading indicator of nationwide price trends, dropped 0.1% in the twelve months through February. Japan's inflation has cooled since last year, weighed down by moribund consumer demand and downward pressure from oil prices.
The BoJ last month introduced negative interest rates to supplement its unprecedented asset-buying programme, a move intended to prevent volatile financial markets and a Yen surge from undermining business confidence and delaying a sustained end to deflation. The central bank now predicts inflation to reach the 2% target around the first half of fiscal 2017, an estimate many analysts say is too optimistic as sluggish consumer spending and plunging oil prices continue to weigh on price growth.
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