Market updates on July 16
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Japan's inflation headwinds go up
Japan's attempts to meet its inflation objective have been heavily affected by slow wage surge as well as intensifying global trade frictions. Furthermore, the country’s cabinet is currently facing headwinds from plans by the Japanese number one mobile phone carrier to have fees reduced.
On Wednesday, NTT Docomo Inc told that it would reduce mobile fees by approximately 40% in the April-June quarter of 2019, reacting to the cabinet’s criticism that fees are extremely high because of a lack of competition in the sector.
Other dominant carriers, including SoftBank Group Corp and KDDI Corp could follow suit that could potentially add to the BOJ’s troubles as it’s still difficult for the institution to meet its 2% inflation objective.
NTT Docomo's announcement showed up the same day Japan’s key bank cut its inflation estimates and warned that global uncertainties as well as the public's sticky deflationary mindset might suggest it would take some time to meet its ambitious inflation objective.
The internal affairs ministry, complying the consumer price index, told that a 40% slip in mobile fees by the key carriers could speed down core consumer inflation by approximately 0.96%. By the way, Japan's CPI data includes up to 585 items, such as mobile charges, making up 2.4% of core CPI.
While the actual fee cuts as well as the influence on CPI might appear to be smaller than the ministry's forecasts, the deflationary effect might push inflation away from the major bank’s 2% objective.
Other experts tell that while fee reductions might put pressure on inflation in the short-term, but they could speed up price surge if customers spur spending on other items.
In addition to this, in September, Japan's core consumer prices managed to ascend by 0.7% from 2017, mostly powered by higher energy costs.
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