29.09.201403:15:37UTC+00Inflation in Japan at lowest in 10 months

New data shows that Japan’s inflation has fallen to a ten month low, adding pressure on the Bank of Japan (BoJ) to enter a new round of monetary stimulus.

A report from the Statistics Bureau showed that the year on year inflation rate through the consumer price index across Japan was at 1.1% in August, excluding the effects of April’s sales tax hike. In the previous month of July, it was at 1.3%. The current reading is the lowest since October last year when it was at 0.9%.

Japan’s central bank set for itself the target to achieve a 2% inflation rate in April last year while committing to maintain low  interest rates to spur a cycle of investments and spending in its economy. Ever since hitting a six year high in April, Japan’s core CPI has dwindled to suggest that consumers are starting to spend less, possibly due to the effects of the tax increase.

Economist Marcel Thieliant from Singapore’s Capital Economics says that the data should  “increase pressure on the BoJ to provide more stimulus.”

BoJ governor, Haruhiko Kuroda warned that the CPI may fall to as low as around 1% before it accelerates to 2% during the second half of its fiscal year in March with help from the stable growth of wages and heightened private sector pricing. Analysts, however, are pessimistic about the governor’s outlook, citing the weaker than expected inflation coupled with the bank’s revised down economic assessment last week and falling household incomes.

Around a third of private sector economists surveyed by Bloomberg believe that the central bank will end up extending its stimulus program by year end while 23% expect it to happen in April at the earliest. 26% said that no additional easing measures will be taken.