Japan reported the core consumer price index (core CPI.) fell in December....
Japan reported the core consumer price index (core CPI.) fell in December making this year a third year of reductions. Core CPI excludes prices of volatile foods such as vegetables, fruit, and seafood but includes energy prices. Reductions for the year were 0.1% less than the previous year, meeting economists’ expectations. Additionally, core CPI in Tokyo lowered by 0.4% in January, coming in higher than the 0.3% analysts projected. Analysts use Tokyo as an indicator of how the country will trend.
Reduction in prices has been a large concern for the Bank of Japan (BOJ). Various actions have been performed but have proven unsuccessful in alleviating price deflations. The strong yen has been hurting country exports and negatively impacting corporate profits. The central bank has stated they plan to continue the zero interest rate in place until price stability is obtained. Earlier this week, BOJ officials left the unsecured overnight call loan rate unchanged within a 0%-0.1% range. Additionally, they left the asset-purchases fund unaltered at 55 trillion yen. Some officials appeared ready to enact additional measures of monetary easing if Europe’s problems begin hurting the country’s economy.
Analysts expect core CPI to stay in the red throughout the fiscal year (starting April 1st) showing a 0.1% reduction for the year unless the yen weakens drastically.Earlier in the week, the bank cut expectations for country growth in 2012.
In other Japan news, country retail sales rose 2.5% for December 2011 compared to the previous December’s. Yet, large retailers saw decreases by 0.4% over the year although this resulted better than the 0.6% reduction economists projected. Additionally, for the fourth quarter retail sales increased 0.8% over the year though large retailers saw depreciations by 1.3%.
The USDJPY broke its range this week and reached a high of 78.20 after the Bank of Japan rate decision. The pair has since then given back all the gains and is trading below 77.00 at the time of writing this report. If the pair closes below 77.00, we expect the pair to continue to trade in a range between 76.50 and 77.00.
