Japan core consumer prices dip in October, pressuring BOJ, Abe on stimulus

Hiroshi Higuchi | Getty Images

Japan's core consumer prices marked their eighth straight month of annual declines in October, government data showed on Friday, illustrating the sheer scale of the central bank's struggle to beat deflation and stagnant growth with diminishing policy options.

The data will keep policymakers under pressure to do more to stimulate the economy, though the Bank of Japan has signaled that fiscal spending may be the preferred option with ultra-loose monetary policy already flooding markets with cash.

The nationwide core consumer price index, which includes oil products but excludes volatile fresh food costs, fell 0.4 percent in October from a year earlier, matching a median market forecast, government data showed.

The so-called core-core inflation index, which excludes food and energy prices and is similar to the core index used in the United States, rose 0.2 percent in October from a year earlier.

Japan's economy expanded for a third straight quarter in the July-September quarter as exports recovered, but weak domestic activity cast doubt on hopes for a sustainable recovery. The BOJ has acknowledged that it will take time for inflation to accelerate to its 2 percent target, modifying its policy framework in September to one better suited to a protracted battle against deflation.

It kept policy steady at a subsequent meeting in October despite pushing back the timeframe for hitting its price target.

Japanese policymakers are starting to see fiscal stimulus as the most likely next step to spark economic growth, given uncertainty over incoming U.S. president Donald Trump's trade and currency policies.

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