Core inflation in Japan in January 2024 decreased for the third consecutive month and fell to the lowest level in 22 months, thus the decrease in inflation is in line with the price stabilization target of the Bank of Japan (BOJ). .
Weak domestic demand, especially affected by rising prices when wages do not increase commensurately, has caused Japan’s economic growth in the fourth quarter of 2023 to decline continuously from October to December. However, the Nikkei Stock Average is reaching a record high, which could create new motivation for the BOJ to end its negative interest rate policy.
According to many experts, the BOJ will likely end the negative interest rate policy, introduced in January 2016, this spring. According to survey company QUICK, a unit affiliated with Nikkei, the policy change could take place in March or April 2024.
Hotel fees rose 26.9% in January, down from 59% in December. Meanwhile, electricity bills fell 21% and overall energy prices fell 12.1%. The headline inflation rate rose 2.2% while the core index, which excludes fresh foods and energy, rose 3.5%.
Kanako Nakamura, an economist at Daiwa Research Institute, said the slowdown in inflation was largely due to “specific causes” and did not reflect “underlying” trends.
According to economists, the drop in hotel fees contrasts with an increase in January last year, which was affected by a reduction in discount rates due to government tourism subsidies and a temporary decline in tourist numbers. arrived in Japan after the Noto earthquake.
“The decrease in energy prices is due to last year’s high prices,” Nakamura said, adding that energy prices will temporarily increase next month as electricity and energy subsidies take place.
Real wages, which account for inflation, fell 2.1% from a year earlier, marking the 21st straight monthly decline. Ongoing spring wage negotiations between unions and employers, known as shunto, are expected to be a key factor in the BOJ’s decision-making.
“The Bank of Japan will likely make moves based on underlying changes in wages and inflation rather than month-to-month trends,” Nakamura said.
