SINGAPORE – Japan’s target of achieving 2 percent inflation by next September may be delayed as China’s economic slowdown affects the price of oil and other natural resources, according to Yasutoshi Nishimura, the deputy economy minister.
China faces the challenge of changing the structure of its economy in the middle to long term, said Nishimura, who is helping spearhead the government’s reform plans as the right-hand man to economy minister Akira Amari, a key architect of Abenomics. Japan hopes China will deal with the issues in its economy in the “correct manner” and overcome them, he said.
Japan’s shipments to China fell 4.6 percent in August from a year earlier as a market rout and economic slowdown in Japan’s biggest trading partner sapped demand. Disappointing Japanese data in recent months have raised concern on the outlook for economic growth after a contraction last quarter and an inflation rate that has slid back to zero.
“Because China’s economy is slowing down, that’s affecting the oil price and other natural resources’ prices,” Nishimura said in an interview in Singapore on Wednesday, speaking through a translator. “All these prices are going down, so the target of 2 percent inflation, the achievement date is a little pushed backwards.”
Inflation data for August that’s to be released Friday is forecast by economists to show that consumer prices excluding fresh food — the central bank’s preferred measure — fell 0.1 percent. The index was stuck at zero in July.
The Bank of Japan refrained from boosting stimulus this month even after the economy shrank last quarter, betting a resumption in growth will be enough to rekindle inflation. The move by Gov. Haruhiko Kuroda and his colleagues leaves the onus on Prime Minister Shinzo Abe’s government to compile a stimulus package to boost what evidence indicates is a lackluster recovery in the second half of the year so far.
“We hope it’s as soon as possible but the BOJ is saying that it’s the first half of 2016,” Nishimura said when asked when he anticipates the target will be met. “Regarding this monetary policy we’ll leave it to the BOJ to handle wisely.”
The central bank has an inflation target of 2 percent in the first half of the fiscal year beginning April 2016. Kuroda said in New York last month that the central bank can achieve the 2 percent target with the current level of monetary stimulus.