Japan’s core consumer price index inflation eased as expected in November amid softening food prices, with the reading casting more doubts over when the Bank of Japan could potentially begin tightening its ultra-loose policy.

Core CPI inflation, which excludes volatile fresh food prices, rose 2.5% year-on-year, data from the Statistics Bureau showed on Friday. The reading was in line with analyst expectations, and slowed from the prior month’s print of 2.9%.

The year-on-year reading was also at its slowest pace since August 2022, while month-on-month growth in core inflation turned static.

Core inflation still remained well above the BOJ’s annual 2% target, although whether sticky inflation will push the bank into tightening policy early remained unclear, after it offered scant cues on a policy pivot during its final meeting of 2023.

A core reading that excludes both fresh food and fuel prices, and is also closely considered by the BOJ, slowed to 3.8% year-on-year from 4% in the prior month, indicating that underlying inflation was also easing.

Headline CPI inflation grew 2.8% year-on-year in November, slowing from the 3.3% seen in the prior month. A month-on-month drop in food and energy prices was a key driver of the softer inflation reading.

The inflation figures come amid some cooling in the Japanese economy, as consumer and capital spending slowed in recent months on headwinds from global markets.

Data earlier this week showed Japan’s exports contracted for the first time in three months, hit chiefly by a slowdown in China, while manufacturing activity in the country also remained in contraction.

Japan’s economy shrank much more than expected in the third quarter, giving the BOJ more impetus to keep policy loose for the near-term. While the central bank is expected to eventually pivot away from its ultra-dovish stance in 2024, the timing of such a pivot remains largely uncertain, with BOJ officials remaining tight-lipped over the matter.

The BOJ recently signaled that Japanese inflation will trend slightly lower in the near-term, but is expected to remain sticky in fiscal 2024, trending above its 2% annual target for the year.

The bank has also stressed that it is seeking more signs of inflation reaching the 2% level before considering an end to its ultra-dovish policies.

The Japanese yen showed little reaction to Friday’s reading, as did 10-year Japanese bond yields.

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