African President Pitches Business Deals To Trump's Son Eric In Davos

Japan's headline inflation rate slowed sharply to 2.1%, its lowest level since March 2022, signaling easing price pressures just as the cost of living becomes a central political issue.

The latest figure is a notable drop from November's 2.9% rate. However, it also marks the 45th consecutive month that inflation has remained above the Bank of Japan's 2% target, keeping pressure on policymakers.

Core Inflation Metrics Show Widespread Easing

A closer look at the data reveals a broad-based slowdown in price growth. Key inflation metrics for December include:

• Core Inflation: This measure, which excludes volatile fresh food prices, fell to 2.4%. The reading matched analyst estimates and was its lowest since October 2024, down from 3% in November.

• "Core-Core" Inflation: Stripping out both fresh food and energy prices, this indicator eased to 2.9% from 3% the previous month.

According to government data, Japan’s full-year inflation for 2025 stood at 3.2%. The rate had hit a two-year high in January 2025 before gradually tapering down over the remainder of the year.

Stubborn Rice Prices Remain a Key Concern

Despite the overall cooling trend, some costs remain elevated. Rice prices, in particular, have been a source of economic and political strain.

In May 2025, rice inflation hit its highest point in over 50 years. While the rate for December came in at 34.4%, marking a seventh straight month of decline from its peak, prices for consumers remain near record levels. Data from Japan's agriculture ministry shows the average price of a 5-kilogram bag of rice was 4,267 yen for the week ended January 11.

The rice crisis in 2025 had serious political repercussions, contributing to the job loss of then-farm minister Taku Eto and prompting former prime minister Shigeru Ishiba to take personal responsibility for tackling the shortage and lowering prices.

Economic Data Intersects with Politics and Policy

The latest inflation report arrives at a critical juncture. Prime Minister Sanae Takaichi is set to dissolve Japan's Lower House in preparation for a snap election on February 8.

Takaichi has made the cost of living a cornerstone of her platform, vowing to suspend the country's 8% food tax for two years to help households. Last year, her government launched a massive $135 billion stimulus package that included grants for local governments and subsidies for utility bills.

Meanwhile, the Bank of Japan is preparing to release its latest policy decision. While a Reuters poll of economists suggests the central bank will likely hold its interest rate at 0.75%, the BOJ is also expected to release fresh inflation and GDP forecasts for 2026.

Japan's core consumer inflation slowed in December but remained above the central bank's 2% target, keeping market expectations for future interest rate increases firmly in place.

The latest data comes as the Bank of Japan (BOJ) concludes a two-day policy meeting. While the bank is widely expected to hold its key policy rate at 0.75%, it is also anticipated to signal its readiness to continue tightening borrowing costs as Japan's economy continues its moderate recovery.

December CPI Eases but Remains Above Target

The core consumer price index (CPI), which strips out volatile fresh food costs, rose 2.4% in December compared to the previous year. This figure matched median market forecasts but marked a significant slowdown from the 3.0% gain seen in November.

The deceleration in the headline inflation number was primarily due to the base effect from a jump in energy costs a year earlier, which occurred after government fuel subsidies ended.

Key inflation metrics for December include:

• Core CPI (ex-fresh food): +2.4% year-over-year

• Core-Core CPI (ex-fresh food & fuel): +2.9% year-over-year

Underlying Inflation Holds Firm

An alternative index closely monitored by the BOJ, which excludes both fresh food and fuel prices, provides a clearer view of underlying inflation trends. This "core-core" index rose 2.9% in December, showing only a slight easing from the 3.0% increase recorded in November.

The persistence of this underlying inflation measure supports the BOJ's policy direction. The central bank concluded its decade-long stimulus program in 2024 and has since raised interest rates in several steps, including a hike in December. These moves were based on the view that Japan is making steady progress toward durably achieving its 2% inflation target.

Former U.S. Special Counsel Jack Smith, who unsuccessfully prosecuted President Donald Trump, told a House of Representatives panel on Thursday that Trump was "looking for ways to stay in power" following his defeat in the 2020 election as he confronted Republican criticism of his investigation.

Smith fielded questions from the Republican-controlled House Judiciary Committee about his two criminal cases, which he dropped after Trump won the 2024 presidential election. One case accused Trump of conspiring to overturn his defeat in the 2020 election, while the other accused him of unlawfully holding onto classified documents.

The hearing marked the first time the American public heard at length from Smith, whose historic prosecutions dominated Trump's years out of power and helped fuel the Republican president's quest for retribution since returning to office. Smith told the panel he expected Trump's Justice Department to try to bring criminal charges against him.

"President Trump was charged because the evidence established that he willfully broke the very laws that he took an oath to uphold," Smith told the House panel. "If asked whether to prosecute a former president based on the same facts today, I would do so, regardless of whether that president was a Democrat or a Republican."

After the hearing, Trump reiterated his calls for Smith to be prosecuted, writing on social media that he had "destroyed the lives of many innocent people."

REPUBLICANS ALLEGE BIAS

Republican lawmakers sought to discredit Smith's investigation and buttress Trump's claims that the probes were an abuse of the legal system. Republicans focused particular attention on Smith's decision to seek limited phone records from former House Speaker Kevin McCarthy and several Republican senators, along with court orders that barred lawmakers from being notified of the subpoenas.

Trump allies have argued that the records show Smith's investigation was overzealous and aimed at the political opposition.

"It was always about politics," Representative Jim Jordan of Ohio, the Republican chair of the Judiciary Committee, said at the start of the hearing. "To get Donald Trump, they were willing to do just about anything."

Smith said the records were necessary to examine Trump's efforts to pressure Republican lawmakers to block certification of the election. He said he had "grave concerns about obstruction of justice in this investigation, specifically with regards to Donald Trump."

Smith's testimony focused primarily on the case that accused Trump of using false voter fraud claims to obstruct the certification of election results following his 2020 defeat to Democrat Joe Biden. He told lawmakers that Republican witnesses, especially those who informed Trump that his fraud claims were not true, would have formed the core of the case had it gone to trial.

"Our investigation revealed that Donald Trump was not looking for honest answers about whether there was fraud in the election," Smith said. "He was looking for ways to stay in power."

A federal judge has barred the Justice Department from disclosing many of the details surrounding Smith's second case, which accused Trump of stashing highly sensitive government documents at his Mar-a-Lago residence following the end of his first term in 2021.

Trump pleaded not guilty to all charges and has repeatedly argued the charges were improperly aimed at damaging his 2024 campaign.

Neither case reached trial and Smith dropped them after Trump won reelection, citing a Justice Department policy against prosecuting a sitting president.

The Trump administration has fired dozens of Justice Department lawyers, FBI agents and staffers who worked on the investigations.

Democrats defended Smith as an apolitical career prosecutor who was guided by the evidence in building his cases against Trump.

Representative Jamie Raskin of Maryland, the top Democrat on the panel, said Trump has assailed Smith "not because you did anything wrong, but because you did everything right."

"You had the audacity to do your job," Raskin added.

Source: Reuters

The 43-day government shutdown may be over, but its shadow still looms over the U.S. economy, scrambling the official data that the Federal Reserve relies on to guide its interest rate policy.

Key inflation reports have been delayed and distorted, leaving investors and policymakers navigating with an unclear picture of the economy. This data disruption is a major reason the Fed is expected to hold interest rates steady in its upcoming meeting.

Here are the core issues:

• Delayed Reports: Major inflation gauges, like the Personal Consumption Expenditures (PCE) index, are running a month behind schedule and won't catch up until April.

• Distorted Data: The October Consumer Price Index (CPI) survey was skipped entirely, forcing statisticians to use estimates that could skew inflation figures for months.

• Policy Uncertainty: Without reliable, up-to-date inflation data, Fed officials may hesitate to adjust monetary policy, preferring to wait for a clearer signal.

Key Economic Reports Thrown Off Schedule

The government shutdown, which spanned October and part of November, directly interfered with the collection and publication of critical economic data.

The Bureau of Economic Analysis is still playing catch-up on the Personal Consumption Expenditures report, the Fed's preferred inflation metric. Thursday's release covered data for October and November, not December as would normally be expected. The regular monthly schedule for PCE reports isn't projected to resume until April.

Meanwhile, the Consumer Price Index, another vital inflation measure, was also hit hard. The Bureau of Labor Statistics (BLS) was unable to conduct its surveys in October, forcing it to skip data collection for that month. Collection in November also occurred later than usual, raising concerns among some economists that holiday sales could have distorted the results.

Federal Reserve officials face a tougher challenge in setting monetary policy due to delayed and potentially distorted inflation data.

Why Bad Data Complicates the Fed's Job

This lack of timely and accurate information makes it difficult to assess the true rate of inflation, increasing the risk that policymakers and investors could be caught off guard by future reports.

The Federal Reserve is currently torn between two priorities: keeping interest rates high to combat inflation or cutting them to support a weakening job market. To make this decision, the central bank depends on economic data to determine which threat—rising prices or unemployment—is greater. With the data feed disrupted, the Fed may choose to wait for more clarity before making any significant moves.

"Fed officials are likely to want to see several more months of data in order to get a clearer understanding of the underlying trends," wrote Brett Ryan, a senior economist at Deutsche Bank, in a commentary.

The Lingering Problem with Housing Costs

The shutdown's impact on housing cost data could have particularly long-lasting effects. Economists have pointed out that because the BLS had to estimate changes in rent and home ownership costs for October, the official inflation numbers may be misleading.

According to economists at Goldman Sachs led by Jessica Rindels, the methodology used to guess October's figures understated shelter inflation in both October and November. "We do not expect an unwind until April 2026, when the units that were supposed to be surveyed in October are sampled again," they wrote.

Because housing is a major component of both household budgets and inflation calculations, this statistical anomaly could be making inflation appear significantly lower than it actually is.

Omair Sharif, founder of Inflation Insights, noted that while the annual "core" CPI inflation appeared to cool to 2.6% in December, this could be a mirage caused by the data issues. "Given distortions in the data, including with respect to rent/OER, core inflation is likely still closer to 3% than 2.5%," Sharif wrote.

Ultimately, the data "blackout" that officials worried about during the shutdown has not fully lifted. As Nomura's chief economist David Seif explained, "Noisy inflation data due to the government shutdown have likely made it difficult for policymakers to gauge the underlying trend of inflation."

A resolution to block President Donald Trump from taking further military action in Venezuela without congressional approval was narrowly defeated in the U.S. House of Representatives. The measure failed on a 215-215 tie vote, marking the second time in recent days that lawmakers have tried and failed to rein in the president's war-making authority, following a similar defeat in the Senate.

The proposed legislation would have directed the President to "remove United States Armed Forces from Venezuela, unless explicitly authorized by a declaration of war or specific statutory authorization."

The razor-thin margin highlights a growing unease within Congress, including among some Republicans, over Trump's foreign policy. The vote underscores a deepening debate about whether Congress should reassert its constitutional power to declare war, a right many feel has been eroded by presidential overreach.

GOP Argues Resolution Was Unnecessary and Partisan

Opponents of the resolution dismissed it as a pointless exercise, arguing that the U.S. does not currently have troops on the ground in Venezuela.

"We do not have anybody there in Venezuela fighting," said Republican Representative Brian Mast of Florida during the pre-vote debate.

Republicans also framed the measure as a politically motivated attack on the president. Mast, the chairman of the House Foreign Affairs Committee, claimed the legislation was driven by "spite," adding, "You will condemn him no matter what he does."

Democrats Aim to Prevent Another 'Forever War'

Supporters of the resolution countered that their goal was to prevent the United States from being drawn into another protracted conflict, similar to the decades-long engagements in Afghanistan and Iraq.

"The American people want us to lower their cost of living, not enable war," stated Representative Gregory Meeks of New York, the leading Democrat on the foreign affairs panel.

This view was echoed by Representative Jim McGovern of Massachusetts, a key sponsor of the resolution. "If the president is contemplating further military action, then he has a moral and constitutional obligation to come here and get our approval," he argued.

Scrutiny Mounts Over Recent U.S. Actions

The debate occurred against a backdrop of significant U.S. operations. On January 3, American forces entered Caracas and captured Venezuelan President Nicolas Maduro. A large U.S. naval flotilla is now blockading the country, firing on boats in the southern Caribbean and Pacific.

President Trump has recently stated that the U.S. will run Venezuela for years. He also told Iranian protestors that "help is on the way" and has threatened military action to acquire Greenland from Denmark, a NATO ally.

Some Democrats criticized the administration for not having a clear plan for Venezuela following Maduro's removal. "The machinery of repression was left in place and the Democratic hopes of Venezuelans are being left behind," said Representative Debbie Wasserman Schultz of Florida.

The Trump administration maintains that Maduro's capture was not a military operation but a limited judicial action to bring him to the U.S. for trial on drug charges. The recent close votes on war powers, including a Senate measure that failed last week only after Vice President JD Vance cast a tie-breaking vote, show the deep divisions over the issue.

The small-cap gauge closed higher on Thursday, notching its eighth record close of 2026.

Source: Yahoo Finance