JPY: Disappointing CPI Data - BBH
Research Team at BBH, notes that the Japan's CPI data disappointed and that disappointment keeps open the possibility that the BOJ takes additional measures as early as next month.
Key Quotes
“The headline February CPI came in a 0.3% as expected. The targeted rate, which excludes fresh food, remained stuck at zero for the second consecutive month. When both fresh food and energy are excluded, prices rose 0.8% year-over-year, which for the sake of comparison, is the same level as reported by the Eurozone for the same period. Tokyo CPI is for March, and here the disappointment was not just the lack of upside progress, but excluding fresh food and energy, deflation deepened to -0.3% from -0.1%. The Bloomberg consensus forecast was for a 0.2% decline.
Weak growth (the Japanese economy contracted in Q4 15), practically non-existent wage growth, and the yen's strength, which offsets the increase of some import prices, including oil, makes is difficult to see how the 2% inflation target will be approached anytime soon. Hence the pressure on the BOJ to do more. For its part, the government may turn to 1) front loading a supplemental budget for the new fiscal year that begins next month, and 2) delay the sales tax increase planned for April 2017. The delay of the sales tax may be announced at the late-May G7 meeting hosted in Japan. A delay in the tax would be consistent G20 call last month.
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