After the Bank of Japan cut its 2019 outlook for core inflation, the rate has improved, with the core gauge at 0.80% (prior: 0.70%) in January. Yet private consumption in the country declined in January, while a February manufacturing PMI of 48.50 pointed to recession for the first time in 30 months. It seems that Japanese inflation is struggling to take off, although a time lag of several months might partially explain it. Headwinds are on the way, starting with a consumption tax hike from 8% to 10% planned for October 2019. The BoJ is not expected to change its current monetary easing course at its 15 March meeting. The inflation target of 2% remains distant, unreachable before 2021.
By Vincent Mivelaz