Japan’s core consumer prices ticked up in November owing to a rise in prices of gasoline and utilities. However, it is still lagging Bank of Japan’s (BOJ) target rate.

Economic Scenario

Japan’s core consumer prices, which exclude prices of fresh food, increased 0.9% year over year in November compared with 0.8% in October. However, the increase was still far from BOJ’s target of 2%. Fresh food is excluded owing to its highly volatile nature. Recently, OPEC extended its production cuts to late 2018, which provided support to oil prices. The statistics bureau attributed the rise in consumer prices to increasing prices of gasoline.

Japan’s economy grew an annualized 2.5% in the third quarter compared with 2.9% in the prior quarter. Moreover, exports increased 0.6% sequentially in the third quarter compared with an initial reading of 0.3.

Bank of Japan’s Tankan survey of more than 1,000 companies reported a reading of 25 in its December report. This is the highest since December 2006 and above 22 reported in September. This index shows the difference between firms that are upbeat about business conditions and firms that expect unfavorable conditions.

Wage earners’ disposable income increased 1.8% year over year in November. Moreover, unemployment in Japan is at a 24-year low, as the jobless rate decreased to 2.7% in November compared with 2.8% in the previous month.

Moreover, household spending increased 1.7% year over year whereas the ratio of open jobs to unemployment increased to 1.56 from 1.55 in the previous month. The BOJ is seen maintaining status quo on stimulus because inflation is still far from its 2% target.

Risks Involved

Japan is also subject to geopolitical risks as Asian markets suffer from massive volatility due to North Korea’s actions. Last month, North Korea launched a Hwasong-15 missile with improved technology that reached an altitude of more than 4,000 kilometers and travelled 1,000 kilometers before dropping into Sea of Japan.