Japan to Change Inflation Gage Which Could Pressure BoJ

The Japanese government plans to adopt a different measure of inflation to the central bank’s, an official told Reuters, in a move that could mean it will take longer for Japan to be declared free of deflation and give ammunition to politicians advocating loose policies.

Prime Minister Shinzo Abe has made victory over nearly two decades of falling prices a top policy pledge. His “Abenomics” package of government spending and loose money from the Bank of Japan have sent stock prices sharply higher and the yen lower this year.

Whereas the central bank targets a 2-percent year-on-year rise in the core consumer price index, a measure that excludes volatile prices of fresh food, the government plans to use “core-core” CPI, which also excludes energy costs.

The change will effectively raise the bar for Abe’s inflation goal, as it means that higher energy prices will be taken out of the equation.

The official, who was involved in the decision to switch to “core-core”, said the change was meant to help ensure that the world’s No. 3 economy truly breaks the grip of deflation.

via Reuters

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