Japan Core Inflation Softens In November

(RTTNews) - Japan's core inflation softened in November on renewed fall in energy prices, official data revealed Friday.

Consumer prices excluding fresh food rose 2.5 percent year-on-year in November, slower than the 2.9 percent rise in October, the Ministry of Internal Affairs and Communications said.

The rate matched economists' expectations. Despite the slowdown, core inflation remained above the central bank's 2 percent target.

Reflecting the slowdown in food inflation, headline inflation eased to 2.8 percent from 3.3 percent in October. At the same time, inflation that excludes fresh food and energy, moderated to 3.8 percent from 4.0 percent in the previous month.

Fresh food inflation posted 10.4 percent, down from 14.1 percent a month ago. At the same time, energy prices plunged 10.1 percent. Meanwhile, services inflation advanced to 2.3 percent, which was the highest since early 1990s.

Capital Economics' economist Marcel Thieliant said it would be wrong to conclude that inflationary pressures are now firmly on the decline. The economist noted that the weakening in underlying inflation was largely due to the pass-through effect of falling import costs. The economist expects inflation to return to 2 percent by the end of next year.

The minutes of the Bank of Japan board meeting held on October 30 and 31 showed that members discussed on how to communicate the modification to the yield curve control policy.

One member said it is necessary to avoid encouraging speculative transactions by giving the impression that the BoJ was forced to make policy decisions to follow fluctuations in market rates.

Early this week, the BoJ had maintained its negative interest rate and the yield curve control and also retained its dovish forward guidance.

However, markets widely expect policymakers to end negative rates in January.