Japan’s Core Inflation Picks Up, Manufacturing Contracts at Slowest Pace in Five Months

Core consumer prices climbed higher in Japan during December, but inflation continued to remain well under the BOJ’s target of 2%. Data released by the government earlier today reveals that core CPI in Japan rose by 0.7% YoY during December, a higher rise than the 0.5% seen in the previous month.

Earlier this week, the BOJ had revised its inflation estimates lower during its monetary policy meeting, even though it sounded more upbeat about economic growth picking up in Japan. Meanwhile, the core core CPI, which excludes volatile food and energy prices, also registered a rise of 0.9% YoY during December, up from 0.8% seen in November.

Manufacturing in Japan continues to remain in contraction for the ninth consecutive month during January, but the pace of contraction has slowed to the lowest levels seen in five months. The Jibun Bank Flash Japan Manufacturing PMI reading for January rose to a seasonally adjusted 49.3 from a final reading of 48.4 in the previous month.

However, the PMI stayed below the 50 level indicating contraction, for the ninth straight month. This is the longest continuous stretch of contraction seen in Japan’s manufacturing sector since February 2013.