JAPAN will not slip back into deflation as improvements in the economy offset the temporary pressure on prices from slumping oil costs, a central bank policymaker said yesterday, signaling that no immediate expansion of monetary stimulus was necessary.

    Bank of Japan (BOJ) board member Yoshihisa Morimoto acknowledged that consumer inflation is likely to slow in coming months due largely to steep falls in crude oil prices, which are driven both by excess supply and weak global demand.

    But the former utility executive warned against focusing too narrowly on monthly consumer price index (CPI) data, stressing that the BOJ was looking more at the broader trend of prices that took into account wages and the economy’s output gap.

    “Crude oil prices have fallen further (since the BOJ’s monetary easing in October) but when you look at other factors, the broad trend hasn’t changed,” Morimoto said.

    Core consumer inflation is likely to head toward the BOJ’s 2 percent target from around October as companies raise wages and prices reflecting improvements in the economy, he added.

    Japan’s economy is emerging from recession as exports and output show initial signs of picking up, offering relief to the BOJ which is keen to stand pat on policy for now after having just eased in October last year.

    Meanwhile, Japan’s current account surplus shrank for a fourth straight year to its smallest on record in 2014 in a worrying sign a bulging trade deficit is hurting the balance of payment, complicating Tokyo’s efforts to rein in a massive public debt.

    Some analysts, however, expect a reduction in the fuel import bill amid a collapse in global oil prices could help narrow a persistent trade gap and boost the surplus on the current account.(SD-Agencies)