Sales Tax Hike Fails to Boost Japan’s Core CPI in October
Japan’s annual CPI rose very slightly in October despite the implementation of the sales tax hike from 8% to 10%. According to data released by the Japanese government earlier today, core CPI grew by 0.4% YoY in October, slightly higher than the 0.3% rise seen in September and coming in line with economists’ expectations.
Without taking into account the effect of the sales tax hike and the free child care which was introduced, October’s core consumer inflation stood at 0.2%, less than that in September. Raw material and labor costs have gone up while electricity costs edged lower, driving the weakness in inflation.
The slight change in CPI points to weakening domestic demand which is likely to exert a significant downward pressure on Japan’s already strained economic growth. Japan’s export-oriented economy has been facing external risks as a result of the ongoing US-China trade war, which has considerably weakened its exports and even strengthened the safe haven currency, dealing a double blow to Japan.
Despite repeated stimulus measures by the BOJ, inflation continues to remain well under the 2% target, and this is unlikely to change anytime soon in the face of continuing weakness in the global economy. Analysts are expecting inflation to stagnate, which would force the BOJ to unveil more monetary easing policies, which are already ultra-loose to begin with.
Sidebar rates
Related Posts
