Japan’s Inflation Rate Slows in November
Japan’s inflation rate cooled in November, providing a clearer sign that the country’s economic recovery is losing steam. The consumer price index (CPI) rose 0.3 percent from a year earlier, the slowest pace since April, according to data released by the Ministry of Internal Affairs and Communications on Monday.
Core Inflation Slows
The core CPI, which excludes volatile fresh food prices, rose 0.4 percent from a year earlier, the slowest pace since February. The core CPI is closely watched by the Bank of Japan (BOJ) as it excludes the most volatile components of the index.
Inflationary Pressure Eases
The slowdown in inflationary pressure suggests that the BOJ’s efforts to stimulate the economy are having a limited impact. The central bank has kept its benchmark interest rate at minus 0.1 percent since 2016, and has been buying government bonds and other assets to keep borrowing costs low.
Weak Demand
The weak demand for goods and services is also weighing on inflation. The BOJ’s tankan survey of business sentiment showed that companies are expecting weak demand in the coming months. The survey also showed that companies are expecting prices to remain flat or decline in the coming months.
Rising Unemployment
The weak demand for goods and services is also contributing to rising unemployment. The unemployment rate rose to 2.9 percent in November, the highest level since April. The weak labor market is likely to put further downward pressure on inflation.
Government Stimulus
The government has been trying to stimulate the economy with fiscal stimulus measures, including tax cuts and spending on infrastructure projects. However, the impact of these measures has been limited so far.
BOJ’s Response
The BOJ is likely to respond to the weak inflationary pressure by expanding its asset purchases and keeping interest rates low. The central bank is also likely to continue to provide liquidity to the banking system to ensure that credit remains available to businesses and households.
Outlook
The outlook for inflation remains uncertain. The BOJ’s tankan survey showed that companies are expecting prices to remain flat or decline in the coming months. The weak labor market and weak demand for goods and services are likely to continue to put downward pressure on inflation.
The BOJ is likely to continue to provide liquidity to the banking system and keep interest rates low in order to support the economy. However, it remains to be seen whether these measures will be enough to boost inflation and support the economic recovery.