BOJ’s Monetary Policy Kept Steady Despite Higher Household Spending

Household spending soared greater than expected in November and the consumer inflation increased as well. Yet, the jobless rate reached a new 24-year record lowe which will help the central bank with its economic recovery and boost the inflation toward its 2 percent target.

The price increase was mainly because of rising fuel costs which will lie low in 2018. This puts pressure on the central bank of Japan to sustain its large monetary support despite other central banks are looking for means to curtail the policies amid the crisis mode.

Despite the minutes of the central bank rate review implies that majority of the policymakers does not see the need to boost the stimulus, the strong monetary policy easing has to be sustained for the meantime as they have agreed.

Inflation may slowly increase toward the beginning of the fiscal year in April since the tightening of the job market pushes companies to increase wages, according to a chief economist of Norinchukin Research Institute. However, the inflation is still far from the two percent target of the central bank which instigates the central bank to sustain the current policy framework.

Reports also cite that the disposable income of wage earners surged by 1.8 percent in November compared last year, indicating higher incomes resulted in a higher spending of consumers.

The consumer price index (CPI) of the country, including oil products but not fresh foods with volatile prices, increase by 0.9 percent in November compared last year based on the data from the government on Tuesday, which is the 11th straight month of gains.

The rate of price growth has also exceeded the October report of 0.8 percent with a median forecast of the same rate.

The Core consumer prices released prior to the CPI data, climbed by 0.8 percent in December compared last year, which is at a faster rate than the growth forecast of 0.7 percent.

On the labor market, that market is improving as shown in the most recent data on Tuesday. The unemployment rate of a new record low of 2.7 percent last month for the 24th year while the job openings increased again for 44-year high.

The Bank of Japan maintained the monetary policy in October with another meeting to be held this month, assuring that they will still be able to catch up with the global market when the massive monetary policy easing will be stopped.