Japan approaches deflation, as CPI stops rising

Japan approaches deflation, as CPI stops rising

27 March 2015, 08:10
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Annual core consumer inflation in Japan, the world's third-largest economy, stopped rising for the first time in nearly two years in February. The last time the core CPI did not rise was in May 2013, when it was flat.

The latest figures are moving further away from the Bank of Japan's (BOJ) inflation target of 2%.

The headline core CPI, which includes oil but not fresh food prices, rose 2% from a year ago, just below market expectations of a 2.1% rise.

The country's economy got out of a recession in the fourth quarter of 2014, but its recovery remains vulnerable on weak household and business spending.

According to analysts, the data put more pressure on the Bank of Japan to expand its monetary policy as plunging oil prices keep inflation subdued.

They do not expect, however, the BOJ to add to last year October's stimulus plans until the second half of this year, because officials had been anticipating the cooling inflation.

Other data, such as household spending falling 2.9% in February from a year ago while retail sales were down 1.8%, also highlighted a problem oficials face in steering the economy towards growth.

The unemployment rate, however, fell to 3.5% in the same time period - close to what economists see as full employment.

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