By Daniel Leussink

TOKYO, Reuters – Japan’s core consumer price rose in January for a fifth consecutive month. However, the pace was slower than the previous month. This raises the possibility that Japan’s central banks will not keep up with other countries in raising interest rates.

Inflation in consumer prices is likely to rise due to higher energy prices. The mobile phone cost cuts of last year are set to drop out of calculation and won’t be an impact on the prices.

According to government data, 0.2% of the core consumer price index (CPI) increased in January compared with a year ago, according to Friday’s government data.

It was lower than the 0.3% median forecast in a Reuters poll, and a 0.5% increase in the two previous months.

Taro Saito is an executive researcher at NLI Research Institute. He stated, “Consumer Inflation will Pick Up From Next Month Onwards on Higher Food and Energy Prices.”

After the mobile phone cost cuts, it may increase to 1.5%.

The Bank of Japan is expected to examine the price data at the next policy meeting in the middle of the month.

Every month since September has witnessed a year-on–year increase in the core CPI. The slowest increase in year-on-year for three months was January.

After a late 2020 domestic travel campaign, the prices of accommodation rose 0.6% compared to a year ago. This was only the lowest rate growth since June 2021.

Last month, the CPI was lowered by approximately 1.5 percentage points due to cellphone fee cuts.

It is evident that price increases in the third largest country in the world have been slow compared to other advanced countries. Slower wage growth has discouraged firms from raising prices.

A small improvement in inflation expectations reinforced hopes that Bank of Japan (BOJ), will continue its loose monetary policy to meet its 2% target.

Saito indicated that although it was unlikely for the central banks to increase monetary policy in the coming months, any steeper increases in consumer prices could lead to a more aggressive government stimulus.

He suggested that this could be done by expanding the subsidy program to reduce high gasoline prices and eventually additional cash handouts for families.

The overall rise of energy prices by 17.9% compared with a year prior in January was due in large part to the escalating fuel costs and rising electricity bills.

Although there are concerns about the potential side effect of a weakening Japanese yen, the BOJ is sticking to its massive monetary stimulus to help inflation hit its target.