Japan Inc.'s Price Expectations Fall Slightly

        TOKYO--Price expectations in Japan's boardrooms fell slightly in the three months to December amid the recent economic downturn, a Bank of Japan survey showed Tuesday, an outcome that bodes ill for the central bank's goal of achieving 2% inflation by later next year.
        About 10,000 companies polled by the central bank said the prices of consumer products will rise at an annual rate of 1.4% in one year, the BOJ said, slightly down from 1.5% in the previous September survey.
        The survey shows that companies" modest inflation expectations have been somewhat affected by the larger-than-expected fall in consumption after a sales tax increase in April that tipped the economy into recession, triggering early elections and the postponement of a second tax increase.
        The results are an unfavorable development for the BOJ, indicating that even relatively stable short to mid-term price expectations are being affected by the current downturn.
        The central bank sees a rise in inflation expectations as crucial for lifting the economy out of years of deflation and stagnation.
        Launched earlier this year, the survey asks companies how fast they think the overall consumer price index--including volatile fresh food prices as well as energy but excluding the impact of the tax hike--will rise in one, three and five years.
        The survey showed that firms of all sizes and sectors expect the inflation rate to rise to 1.6% in a three-year time frame and 1.7% in five-years. Those figures were unchanged from the previous survey.
        The quarterly poll is a part of the BOJ's closely watched tankan survey that covers the sentiment, profits and investment plans of firms.
        The BOJ sees the behavior of companies, including how they set wages for workers and prices for sales products, as crucial for the bank to attain a stable 2% inflation target.
        The central bank surprised markets on Oct. 31 by taking additional easing measures to prevent a deflationary mind-set from returning amid sudden falls in global crude oil prices and falling inflation expectations.
        Like the U.S. Federal Reserve, the BOJ looks into inflation expectations among companies and the general public through a combination of government bond yields and surveys of firms and households.
        Contrary to the U.S., the BOJ doesn't view those wider expectations as anchored around 2% and thus inflation expectations tend to follow the actual consumer inflation rates, which have been on a downtrend in the past months.
        Companies expect their sales prices to rise 1.0% in one year and 1.7% in three-years and 2.0% in five years. All three figures marked a 0.1 percentage point drop from the previous survey.
        Write to Tatsuo Ito at tatsuo.ito@wsj.com
        Subscribe to WSJ: http://online.wsj.com?mod=djnwires
        (END) Dow Jones Newswires

        December 15, 2014 21:10 ET (02:10 GMT)

#Japan
#Tokyo
#BOJ
#TatsuoIto
#USFed