| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - M/M | -0.7% | -0.8% to -0.5% | -0.6% | 0.7% |
| CPI - Y/Y | 3.3% | 3.2% to 3.5% | 3.4% | 4.4% |
| Ex-Fresh Food - M/M | -0.7% | -1.0% to -0.4% | -0.7% | 0.5% |
| Ex-Fresh Food - Y/Y | 3.2% | 3.0% to 3.5% | 3.3% | 4.3% |
| Ex-Fresh Food & Energy - M/M | 0.4% | 0.2% to 0.5% | 0.3% | 0.5% |
| Ex-Fresh Food & Energy - Y/Y | 3.1% | 2.8% to 3.3% | 3.2% | 3.0% |
Highlights
Consumer prices in Tokyo, the leading indicator of the national average, posted year-over-year gains of above 3 percent in February in two key measures, slowing significantly from four-decade highs of over 4 percent in January, thanks to the government's new program to provide subsidies to consumer electricity and natural gas suppliers, data from the Ministry of Internal Affairs and Communications released Friday showed.
The government scheme aimed at easing the pain of many households covers a period from January to September this year, which is reflected in utility bills issued in February onward. The yen remains relatively weak compared to year-earlier levels, limiting Japan's purchasing power and keeping the costs for importing materials and products high.
The Bank of Japan is unlikely to make a drastic change to its yield curve control policy framework for now as stable 2 percent inflation with sustained wage growth and economic growth is unlikely to be achieved soon. The focus is on how the central bank and the government will review their 10-year-old policy coordination accord that called for a 2 percent inflation target after the new BoJ governor takes office in April.
The prices of goods excluding fresh food rose 6.0 percent from a year earlier in February, pushing up the Tokyo area total CPI by 2.44 percentage points, with the pace of increase slowing from 8.5 percent (a positive 3.42-point contribution) in January. The prices of services excluding owners' equivalent rent gained 1.9 percent on the year, adding 0.68 points to the CPI. It is a much slower pace compared to sharp markups in goods, but higher than 1.7 percent (0.60-point contribution) in January, indicating firms are raising wages to secure workers.
The Econoday Consensus Divergence Index stood at plus 2, just above zero, which indicates the Japanese economy is performing slightly better than expected after underperforming recently. Excluding the impact of inflation, the index was at plus 10.
The core consumer price index (excluding fresh food) in the capital's 23 wards rose 3.3 percent in February, coming in slightly higher than the median economist forecast of a 3.2 percent rise. It is the 18th straight year-over-year rise after rising 4.3 percent in January, 3.9 percent in December, 3.6 percent in November, 3.4 percent in October and 2.8 percent in September.
In January, the core CPI's annual rate rose at the fastest pace in more than 41 years, since the 4.3 percent rise in May 1981, with or without the direct impact of the sales tax hikes in 2014 and 1997 and the introduction of the tax in April 1989. Even during the 12-month period of being boosted by a sharp sales tax hike to 8 percent from 5 percent in April 2014, the core CPI peaked at a 2.8 percent rise. The sales tax is currently at 10 percent after another rise in 2019.
The core-core CPI (excluding fresh food and energy) -- a key indicator of the underlying trend of inflation -- rose 3.2 percent on the year in February for the 11th straight rise. It was also just above the median forecast of a 3.1 percent rise. It followed increases of 3.0 percent in January, 2.7 percent in December, 2.4 percent in November, 2.2 percent in October and 1.7 percent in September. April's 0.8 percent gain was the first year-on-year rise in 13 months. This measure does not receive support from higher energy prices but it has been on an uptrend in the face of markups in other items. With or without the direct impact of the sales tax increases in 2014 and in 1997, the 3.2 percent gain in February is the highest in more than 31 years, since the 3.2 percent rise in August 1991.
The total CPI gained 3.4 percent on year in February, marking the 18th straight year-on-year gain and coming in higher than the median forecast of a 3.3 percent rise (forecasts ranged from 3.2 percent to 3.5 percent). It followed increases of 4.4 percent in January, 3.9 percent in December, 3.7 percent in November, 3.5 percent in October and 2.8 percent in September. The 4.4 percent increase in January is the largest in more than 41 years, since the 4.8 percent gain in June 1981.
Fresh food prices, a volatile factor, continued rising, up 5.4 percent on year in February, pushing up the overall index by 0.22 percentage point, with the pace of increase decelerating from a revised 7.0 percent rise and a 0.29-point contribution the previous month. The prices for both fresh and processed food, ranging from fish, buns, soft drinks, and cooking oil to hamburgers at restaurants and chicken, continued pushing consumer inflation higher.
The government scheme aimed at easing the pain of many households covers a period from January to September this year, which is reflected in utility bills issued in February onward. The yen remains relatively weak compared to year-earlier levels, limiting Japan's purchasing power and keeping the costs for importing materials and products high.
The Bank of Japan is unlikely to make a drastic change to its yield curve control policy framework for now as stable 2 percent inflation with sustained wage growth and economic growth is unlikely to be achieved soon. The focus is on how the central bank and the government will review their 10-year-old policy coordination accord that called for a 2 percent inflation target after the new BoJ governor takes office in April.
The prices of goods excluding fresh food rose 6.0 percent from a year earlier in February, pushing up the Tokyo area total CPI by 2.44 percentage points, with the pace of increase slowing from 8.5 percent (a positive 3.42-point contribution) in January. The prices of services excluding owners' equivalent rent gained 1.9 percent on the year, adding 0.68 points to the CPI. It is a much slower pace compared to sharp markups in goods, but higher than 1.7 percent (0.60-point contribution) in January, indicating firms are raising wages to secure workers.
The Econoday Consensus Divergence Index stood at plus 2, just above zero, which indicates the Japanese economy is performing slightly better than expected after underperforming recently. Excluding the impact of inflation, the index was at plus 10.
The core consumer price index (excluding fresh food) in the capital's 23 wards rose 3.3 percent in February, coming in slightly higher than the median economist forecast of a 3.2 percent rise. It is the 18th straight year-over-year rise after rising 4.3 percent in January, 3.9 percent in December, 3.6 percent in November, 3.4 percent in October and 2.8 percent in September.
In January, the core CPI's annual rate rose at the fastest pace in more than 41 years, since the 4.3 percent rise in May 1981, with or without the direct impact of the sales tax hikes in 2014 and 1997 and the introduction of the tax in April 1989. Even during the 12-month period of being boosted by a sharp sales tax hike to 8 percent from 5 percent in April 2014, the core CPI peaked at a 2.8 percent rise. The sales tax is currently at 10 percent after another rise in 2019.
The core-core CPI (excluding fresh food and energy) -- a key indicator of the underlying trend of inflation -- rose 3.2 percent on the year in February for the 11th straight rise. It was also just above the median forecast of a 3.1 percent rise. It followed increases of 3.0 percent in January, 2.7 percent in December, 2.4 percent in November, 2.2 percent in October and 1.7 percent in September. April's 0.8 percent gain was the first year-on-year rise in 13 months. This measure does not receive support from higher energy prices but it has been on an uptrend in the face of markups in other items. With or without the direct impact of the sales tax increases in 2014 and in 1997, the 3.2 percent gain in February is the highest in more than 31 years, since the 3.2 percent rise in August 1991.
The total CPI gained 3.4 percent on year in February, marking the 18th straight year-on-year gain and coming in higher than the median forecast of a 3.3 percent rise (forecasts ranged from 3.2 percent to 3.5 percent). It followed increases of 4.4 percent in January, 3.9 percent in December, 3.7 percent in November, 3.5 percent in October and 2.8 percent in September. The 4.4 percent increase in January is the largest in more than 41 years, since the 4.8 percent gain in June 1981.
Fresh food prices, a volatile factor, continued rising, up 5.4 percent on year in February, pushing up the overall index by 0.22 percentage point, with the pace of increase decelerating from a revised 7.0 percent rise and a 0.29-point contribution the previous month. The prices for both fresh and processed food, ranging from fish, buns, soft drinks, and cooking oil to hamburgers at restaurants and chicken, continued pushing consumer inflation higher.
Market Consensus Before Announcement
Consumer prices in Tokyo, the leading indicator of the national average, is expected to post year-over-year gains of just over 3 percent in February, 3.2 percent in the core reading (excluding fresh food) and 3.3 percent in total CPI, slowing significantly from over 41-year highs of 4.3 percent (core) and 4.4 percent (total) recorded in January, thanks to the government's new program to provide subsidies to consumer electricity and natural gas.
The government scheme aimed at easing the pain of many households covers a period from January to September this year, which is reflected in utility bills issued in February onward. The yen remains relatively weak compared to year-earlier levels, limiting Japan's purchasing power and keeping the costs for importing materials and products high.
The government scheme aimed at easing the pain of many households covers a period from January to September this year, which is reflected in utility bills issued in February onward. The yen remains relatively weak compared to year-earlier levels, limiting Japan's purchasing power and keeping the costs for importing materials and products high.
Definition
The Consumer Price Index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Annual changes in the CPI represent the rate of inflation.
The Tokyo CPI data covers consumer prices in the capital’s 23 wards located in the eastern part of the Tokyo Prefecture but excludes the 26 cities and other smaller municipalities that occupy larger areas in other parts of the province (islands in the Pacific Ocean are also excluded). It is a leading indicator of the national average CPI as it is released about a month ahead of the national data. The survey for the Tokyo CPI is conducted on one day around the 12th (Wednesday, Thursday or Friday) each month and its results are released toward the end of the same month or early in the following month.
The national CPI has a larger energy weight of 712 out of 10,000, compared to 470 in the Tokyo data, because the shares of consumption of electricity, gasoline and heating oil tend to be bigger in the rural areas. There is only a slight difference in the weighting of food excluding perishables between the national data (2,230) and the Tokyo data (2,144).
The Tokyo CPI data covers consumer prices in the capital’s 23 wards located in the eastern part of the Tokyo Prefecture but excludes the 26 cities and other smaller municipalities that occupy larger areas in other parts of the province (islands in the Pacific Ocean are also excluded). It is a leading indicator of the national average CPI as it is released about a month ahead of the national data. The survey for the Tokyo CPI is conducted on one day around the 12th (Wednesday, Thursday or Friday) each month and its results are released toward the end of the same month or early in the following month.
The national CPI has a larger energy weight of 712 out of 10,000, compared to 470 in the Tokyo data, because the shares of consumption of electricity, gasoline and heating oil tend to be bigger in the rural areas. There is only a slight difference in the weighting of food excluding perishables between the national data (2,230) and the Tokyo data (2,144).
Description
The CPI has been in the spotlight as Japan struggled to make its way out of deflation. It is now closely monitored because the recent spike in energy and commodity markets and supply chain constraints during the global pandemic boosted Japan’s inflation rate to the highest in over four decades in 2022.
The report tracks changes in the price of a basket of goods and services that a typical Japanese household might purchase. The preferred measure is the year over year percent change. Markets will typically pay more attention to the core measure that excludes only fresh food because volatile food prices can distort overall CPI. A second core measure that excludes energy as well is also available. As the most important inflation indicator, the CPI data are closely monitored by the Bank of Japan. Rising consumer prices may prompt the BoJ to raise interest rates in order to manage inflation and slow economic growth. Higher interest rates make holding the yen more attractive to foreign investors, and this higher level of demand will place upward pressure on the value of the yen.
An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets and your investments.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to government securities. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
The report tracks changes in the price of a basket of goods and services that a typical Japanese household might purchase. The preferred measure is the year over year percent change. Markets will typically pay more attention to the core measure that excludes only fresh food because volatile food prices can distort overall CPI. A second core measure that excludes energy as well is also available. As the most important inflation indicator, the CPI data are closely monitored by the Bank of Japan. Rising consumer prices may prompt the BoJ to raise interest rates in order to manage inflation and slow economic growth. Higher interest rates make holding the yen more attractive to foreign investors, and this higher level of demand will place upward pressure on the value of the yen.
An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets and your investments.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to government securities. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
