How useful are the BoJ’s alternative inflation gauges?

With falls in headline inflation raising questions about its policy approach, the Bank of Japan has recently been highlighting alternative price gauges that show inflation to be rising. These alternatives are timely, but narrow and skewed towards food prices, making them poor measures of general price trends. Broader measures show that ample spare capacity is still keeping a lid on inflation pressures and, with wages falling despite low unemployment, we remain convinced that policymakers will have to step up the pace of monetary easing before long.