TOKYO: Japan’s key inflation gauge ticked up in February, putting the Bank of Japan halfway to its goal of 2 percent. Yet a strengthening yen and the threat of a global trade war underscore the central bank’s vulnerability to global markets and events.
The core consumer price index, excluding volatile fresh food prices, rose 1 percent from a year earlier and picked up from a 0.9 percent rise in January, according to the Ministry of Internal Affairs and Communications.
Energy-related costs including electricity fees and gasoline prices continued to be the main driver behind the gains, pushing the index to its largest on-year growth since a 2.2 percent rise in March 2015. Stripping out the effect of a consumption tax hike in 2014, the increase was the largest since August of that year.
Despite the progress made inflation remains far from the BOJ’s target, while the yen’s 7 percent gain so far this year has raised the risk of price gains stalling. Even a modest decline in oil prices would work against the central bank, which blamed a price collapse in 2014 for its struggles to generate inflation.
BOJ Gov. Haruhiko Kuroda has faced questions about when the central bank will begin normalizing its monetary policy, given a growing economy and moderately rising inflation. He underscored this month that “powerful” easing will continue, even as his global peers continue to tighten policy.
“The BOJ has no choice but to patiently continue easing,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management Co.
