Forex News – Japan inflation slows further

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Inflation in Japan is slowing down as indicated by the Consumer Price Index (CPI). The country’s core CPI index fell 0.1 percent in December compared to a year earlier. This raises concerns for a delayed economic recovery, caused after the devastating March 2011 earthquake and tsunami. The strong yen has also affected exports.

The core CPI has fallen for the third month in a row, in line with expectations and following November’s 0.2 percent decline. The index includes oil products but excludes volatile prices of fresh fruit, vegetables and seafood.

The data will pressure the Bank of Japan to prolong its ultra-easy monetary policy to keep battling deflation until the economy picks up momentum. This may be difficult due to  Europe’s economic crisis. If risks from the euro-zone debt crisis heighten, the central bank could move for additional policy easing in the near term.