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A slower factory output and inflation rate deal a fresh challenge for Japan’s bid to pull the economy out of stagnation. AFP pic

TOKYO: Japanese annual core consumer inflation slowed for a fourth straight month in November due largely to sliding oil prices, highlighting the challenges the central bank faces in achieving its two per cent inflation target.

Factory output unexpectedly fell and real wages marked the steepest drop in five years, underscoring the fragility of the recovery and dealing a blow to premier Shinzo Abe’s stimulus policies aimed at pulling the economy out of stagnation.

The core consumer price index, which excludes volatile fresh
food but includes oil products,
rose 2.7 per cent in November from a year earlier, government data showed yesterday.

Stripping out the effects of a sales tax hike in April, core consumer inflation was 0.7 per cent, slowing from 0.9 per cent in October and far below the Bank of Japan’s (BoJ) two per cent target.

“While the economy is recovering, falling oil prices and slowing inflation will force the BoJ to ease policy further at some point next year,” said Hiroshi Watanabe, senior economist at SMBC Nikko Securities.

Japan’s economy slipped into recession in the wake of April’s tax hike, though analysts expect growth to rebound in the current quarter as exports and output pick up.

Factory output slid 0.6 per cent in November after two straight months of gains, largely the effect of big-ticket items such as computer chip-making equipment and boilers boosting October output and confounding market expectations of a 0.8 per cent rise.

Economics Minister Akira Amari said the drop in November was likely a temporary blip, given the sharp increase projected for coming months.

BoJ governor Haruhiko Kuroda stressed last week that Japan was on track to hit the price goal, shrugging off speculation that a recent plunge in oil prices would weigh on consumer prices and force him to ease policy again early next year. Reuters

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