Tokyo: Japan’s inflation rate slipped 0.1% in 2012, data showed on Friday just days after the Bank of Japan (BoJ) set a new target to beat the deflation that has haunted the world’s third-largest economy for years.
The figures marked the fourth straight annual price decline. The core index, which excludes volatile prices of fresh food, slipped 0.2% in December alone, meeting the market’s expectation.
Deflation is bad for the economy because it encourages consumers to put off spending in the belief their intended purchases will be cheaper in the future, softening demand and hurting producers and their own capital investment plans.
On Tuesday, Japan’s central bank adopted a 2% inflation target and set out plans for indefinite monetary easing in a bid to turn the economy around, although analysts have been mixed on whether it would stoke growth.
Switching from an inflation “goal” to a more explicit “target” was driven by the “importance of flexibility in the conduct of monetary policy in Japan”, BoJ said.
However, two of the nine BoJ policy board members voted against the new inflation target demanded by the country’s hawkish new Prime Minister Shinzo Abe, who swept to power last month on a promise to heap pressure on the bank for more aggressive policy action as part of his plan to fix the long-suffering economy.