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TOKYO (Reuters) – Core consumer price inflation in Tokyo has increased slightly more than expected in January due to rising energy prices, but the Japanese central bank still has a long way to go to achieve its elusive goal of 2% inflation.
The Bank of Japan lowered its inflation forecast on Wednesday and maintained its mbadive stimulus package, with Governor Haruhiko Kuroda warning of growing risks to the economy from protectionism and declining demand .
Tokyo's consumer prices, a leading indicator of national price trends, rose 1.1% in January from a year earlier, according to government data released on Friday. .
The rise in the core consumer price index of the capital of Japan, which includes petroleum products but excludes the prices of fresh produce, compared with the median estimate of an increase in 0.9% in a survey conducted by Reuters with economists.
"Electricity and gas prices have boosted Tokyo's core CPI, but they should begin to weaken from next spring due to falling natural gas prices and of oil, "said Takeshi Minami, chief economist at the Norinchukin Research Institute.
"We expect Tokyo's core CPI to hover around 1% in the next few months, but it's likely to slow down thereafter," he said, adding that the BoJ should pursue its recovery policy to reach its price target.
The BOJ on Wednesday lowered its basic consumer inflation forecast to 0.9 percent in the next fiscal year, up from 1.4 percent expected last October, due to falling oil prices.
The so-called core CPI, which eliminates the effect of energy and fresh food prices, rose 0.7% in January, following a 0.6% gain in December.
The data show that Tokyo's overall CPI rose 0.4% in January compared with the previous year, at the same pace as last month.
Japan's economy contracted in the third quarter of last year and some economists suspect a rebound in October-December to be limited given global trade protectionism and the cooling of foreign demand.
Analysts say the risks of recession for the Japanese economy have increased. [ECILT/JP]
However, despite growing risks, the BoJ maintained this week its belief that the Japanese economy would continue to grow at a moderate pace.
Many BoJ policymakers are worried about adding further stimulus, although external shocks could force the central bank to pull the trigger if the economy is likely to deteriorate sharply.
(Report by Ritsuko Shimizu and Kaori Kaneko, edited by Chang-Ran Kim and Kim Coghill)
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