Friday, 1 December 2006

Japanese core consumer prices edge up, jobless rate and household spending fall

Japan remained out of deflation in October, but barely. From AFP/CNA:

Japan has reported a mixed batch of economic data including weaker-than-expected inflation that triggered fresh uncertainty about when interest rates will be raised again.

Japanese core consumer prices rose by just 0.1 percent in October from a year earlier, the Ministry of Internal Affairs and Communications said, as the economy struggles out of its long deflationary torpor...

Excluding energy, core prices were down 0.4 percent...

At the same time, the jobless rate fell to 4.1 percent in October from 4.2 percent in September, approaching May's eight-year low of 4.0 percent, the ministry said.

Spending by households in October dropped 2.4 percent from a year earlier, declining for a 10th straight month although by less than the 3.5 percent expected by the market.

So what do these data mean? An interest rate hike. At least according to some economists.

... Takuji Aida, chief economist at Barclays Capital Japan, said that a January interest rate rise still looked likely, predicting a rebound in core consumer price inflation to 0.2 percent in November...

Morgan Stanley economist Takehiro Sato suggested that core consumer prices were no longer the major factor guiding monetary policy in Japan.

"Rather, the central bank is focusing on the future prospects for the CPI in the mid- to longer-term. Therefore, the outlook for the rate hike wouldn't be affected by today's figures," he wrote.

Jerram at Macquarie Securities took a similar view, predicting: "In the light of recent positive data on the business cycle and comments from various BOJ officials, we think a rate hike in December or January is likely."

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