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Japan Inflation Rises But Short of BOJ Target

Japan released a flurry of data Friday which showed a spotty economic recovery, as the consumption tax hike in April continued to weigh on growth.

Household spending fell 5.9 percent in July from the year-ago period, much larger than the 3 percent drop forecast in a Reuters poll, and after falling 3 percent in June.

Retail sales showed a slight improvement, rising 0.5 percent on year in July, above expectations for a 0.1 percent rise in a Reuters poll, and recovering from the 0.6 percent drop in June.

Nationwide core consumer price index rose 3.3 percent in July, in line with forecasts, but when excluding the effect of the April tax hike core inflation stood at 1.3 percent in July, below the inflation target that the Bank of Japan (BOJ) pledged to meet sometime next year.

“The inflation that you’re getting is just a rise in price levels associated with that tax increase so this is not really the desirable inflation that you want,” said Paul Sheard, chief global economist at Standard & Poor’s. “In fact, it’s kind of counter-productive [in the sense that] it just eats into real purchasing power and creates a bit of a headwind for the recovery.”

via CNBC [1]

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Alfonso Esparza

Alfonso Esparza [6]

Senior Currency Analyst at Market Pulse [7]
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza