Japan inflation around zero for second month in a row

Tokyo: Prices in Japan didn’t rise in February, reinforcing just how far the nation remains from reaching the Bank of Japan’s 2 per cent inflation goal.
Japan’s consumer prices excluding fresh food didn’t budge for a second consecutive month, as forecast. Stripping out energy and food costs, the gauge rose 0.8 per cent from last year, according to a statistics bureau report on Friday.
Time is ticking for bank of Japan (BoJ) governor Haruhiko Kuroda, who is forecasting inflation will accelerate to reach 2 per cent in about a year. Even with the central bank’s adoption in January of a negative interest rate alongside the BoJ’s already unprecedented asset purchases, prices aren’t rising.
"Inflation hasn’t hit bottom yet — it’s going down further,” Shinichiro Kobayashi, a senior economist at Mitsubishi UFJ Research and Consulting in Tokyo, said before the report was released. "It’s gradually becoming clearer that Kuroda won’t attain the price target as he projects.”
Kobayashi expects consumer prices excluding fresh food will drop by as much as 0.5 per cent in May or June, and the bank will probably have to add stimulus in July, he said.
There is little sign of inflationary pressure in Japan. The economy contracted last quarter, wage growth is slow, the yen has strengthened — driving down import prices — and although oil has risen about 10 per cent this year, its price is still about half of what it was at the end of February 2015.
The price gauge Kuroda often cites also is showing weakness. The BoJ’s price index, which excludes energy and fresh food, gained 1.1 per cent in February for a second month, down from 1.3 per cent in December, according to a central bank report on Friday.
"It’s likely the BoJ’s price measure will slow to below 1 per cent this year with the fading impact of a weak yen and subdued growth in base salaries,” said Koya Miyamae, an economist at SMBC Nikko Securities.
Japanese companies and households piled up cash at record levels in the last quarter of 2015, offering little support for an economy that some analysts forecast is at risk of contracting again.
Corporate assets in cash and deposits reached a record high of ¥246 trillion ($2.2 trillion), rising for the 29th consecutive quarter, according to Flow of Funds data released by the Bank of Japan on Friday. Households’ assets rose to ¥902 trillion, the highest level on record, marking nine straight years of growth.
The data adds to concerns among economists that Japan’s recovery continues to be underwhelming after the economy contracted in the fourth quarter. Households are tightening their purse strings as wages are stagnant while companies are hesitant to invest at home amid global economic uncertainty.
"Japan’s virtuous economic cycle is quite weak,” said Hideo Kumano, an economist at Dai-ichi Life Research Institute and a former BoJ official. "I expect a very fragile recovery this quarter.” – Bloomberg News