— See Separate Table For Details Of Individual Economist Forecasts

TOKYO (MNI) – Japan’s nationwide core consumer price index (core
CPI) is seen falling 0.6% on year in November, matching the October
drop, according to the median forecast of analysts surveyed by Market
News International.

In October, core CPI — excluding fresh food but including energy
— jumping from a 1.1% decline marked in September, due mainly to hike
in the tobacco tax that took effect Oct. 1.

The Ministry of Internal Affairs and Communication will release the
CPI data at 0830 JST on Tuesday, Dec. 28. (2330 GMT Monday).

“Increases in prices of international commodities such as crude
oil have had limited impact on rises in domestic prices due mainly to
the slow recovery in domestic demand and the recent strong yen,” said
Takumi Tsunoda, senior economist at Shinkin Central Bank.

Looking ahead, Keiji Kanda, economist at Daiwa Institute of
Research, said, “Declines in CPI will likely shrink gradually, following
improvement in the negative output gap.”

Japan’s output gap — excess capacity vs. slack demand — stood at
-3.1% in the July-September quarter, the smallest since -0.8% in Q3 of
2008, when the U.S. investment firm Lehman Brothers collapsed.

The BOJ is closely watching the output gap, which is believed to
have a major impact on prices with a lag of about a year.

The nine board members of the Bank of Japan forecast nationwide
core CPI for fiscal 2011 ending on Mar. 31, 2012 would rise +0.1% y/y.

But economists are less optimistic about fiscal 2011 CPI.

“It will be difficult for core CPI to enter positive territory
during fiscal 2011,” said Yoshiki Shinke, senior economist at Dai-Ichi
Life Research Institute.

Tokyo core CPI for December, which will be released together with
the November nationwide core CPI, is expected to show a 0.4% fall on
year, posting the smallest fall since a like-sized decline in March

** Market News International Tokyo Newsroom: 81-3-5403-4838 **

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