Japan’s Inflation Rate is still Far From BOJ’s 2 Percent Target

Japan’s core inflation rate was on 0.7 percent in February, remaining distant from the Bank of Japan’s 2 percent target.

The core inflation rate, defined as the Consumer Price Index (CPI) with all item except fresh food, rose 0.7 percent from a year earlier and 0.1 percent from a month earlier in February. The annual rate falls short of the market expectation for a 0.8 percent gain, according to Reuters.

The headline CPI rose 0.2 percent over a year, and remain unchanged compared to the previous month. Food price, which is excluded from the core CPI, recorded an -1.4 percent decrease over the year. Meanwhile, the fuel, light and water charges recorded a 5.3 percent increase.

Analysts expect the inflation rate experience further slowdown. As quoted in the Financial Times, Darren Aw at Capital Economics thinks that the capacity shortage, which supported the inflation for some time, is diminishing, and the inflation rate might turn negative in the middle of the year.

Takeshi Minami at Norinchukin Research Institute, as quoted by Reuters, said that as the global economy is weakening, it makes Japan harder to achieve the 2 percent inflation rate BOJ targeted.