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Japan’s December 2006 core consumer prices: A weaker rise than expected

January 26, 2007
By Ken Worsley


As we mentioned this morning, Japan’s December 2006 core consumer prices were expected to show a year-on-year 0.2% gain. That did not happen: Business Week and others are reporting that the consumer price index for December is up 0.1% versus the same month last year.

For the whole of 2006, the core CPI, which excludes fresh food, notched a gain of 0.1%, the first time in eight years that core CPI has increased over the course of a calendar year.

And the debate over interest rates goes on: Business Week announces that the weak rise in core CPI is “deflating expectations for the central bank to raise interest rates next month.” They quote Hiroshi Shirashi from Lehman Brothers, who said:

Given this tame data, it’s really difficult for the bank to explain why it would want to tighten credit next month as domestic prices haven’t improved.

I think Mr Shirashi is right on here. Plenty of observers have made the easy criticism of saying that the BOJ did not raise interest rates due to ‘political pressure,’ yet I haven’t seen any of them give an argument as to why the Bank should have even considered raising them in the first place.

Filed Under Bank of Japan, Consumer Price Index 

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Comments

One Response to “Japan’s December 2006 core consumer prices: A weaker rise than expected”

  1. John Sheridan on January 27th, 2007 1:23 am

    So, what is one good argument for raising interest rates, aside from ‘normalization’ and what the outside countries might want?

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