| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| CPI - M/M | -0.2% | -0.5% to 0.2% | 0.3% | -0.6% | |
| CPI - Y/Y | 3.2% | 3.1% to 3.5% | 3.3% | 3.4% | |
| Ex-Fresh Food - M/M | -0.2% | -0.4% to 0.1% | 0.3% | -0.7% | |
| Ex-Fresh Food - Y/Y | 3.1% | 3.1% to 3.4% | 3.2% | 3.3% | |
| Ex-Fresh Food & Energy - M/M | 0.4% | 0.2% to 0.5% | 0.4% | 0.3% | |
| Ex-Fresh Food & Energy - Y/Y | 3.3% | 3.1% to 3.3% | 3.4% | 3.2% | 3.1% |
Highlights
Consumer prices in Tokyo, the leading indicator of the national average, posted a slight easing in two key measures in March after their annual rates decelerated sharply to just above 3 percent in February from four-decade highs of over 4 percent the previous month as the government's program to provide subsidies to electricity and natural gas suppliers continues to cap utility charges, data from the Ministry of Internal Affairs and Communications released Friday showed.
By contrast, the narrow CPI measure remains on a gradual uptrend as many firms continue to pass higher costs for food, beverages and durable goods onto customers.
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 has appreciated slightly to around Y133 from Y136 in recent trading but it is still much weaker than the year-ago level of Y122, keeping Japanese imports expensive.
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 prices of goods excluding fresh food rose 5.5 percent from a year earlier in March, pushing up the Tokyo area total CPI by 2.24 percentage points, with the pace of increase slowing from 6.0 percent (a positive 2.43-point contribution) in February and 8.5 percent (plus 3.42 points) in January. The prices of services excluding owners' equivalent rent gained 2.3 percent on the year, adding 0.82 points to the CPI. It is a much slower pace compared to sharp markups in goods, but is on clear uptrend after rising 1.9 percent (plus 0.67 point) in February and 1.7 percent (0.60 point) in January, indicating firms are raising wages to secure workers.
The Econoday Consensus Divergence Index stood at plus 10, above zero, which indicates the Japanese economy is performing better than expected after underperforming recently. Excluding the impact of inflation, the index was at plus 21.
By contrast, the narrow CPI measure remains on a gradual uptrend as many firms continue to pass higher costs for food, beverages and durable goods onto customers.
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 has appreciated slightly to around Y133 from Y136 in recent trading but it is still much weaker than the year-ago level of Y122, keeping Japanese imports expensive.
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 prices of goods excluding fresh food rose 5.5 percent from a year earlier in March, pushing up the Tokyo area total CPI by 2.24 percentage points, with the pace of increase slowing from 6.0 percent (a positive 2.43-point contribution) in February and 8.5 percent (plus 3.42 points) in January. The prices of services excluding owners' equivalent rent gained 2.3 percent on the year, adding 0.82 points to the CPI. It is a much slower pace compared to sharp markups in goods, but is on clear uptrend after rising 1.9 percent (plus 0.67 point) in February and 1.7 percent (0.60 point) in January, indicating firms are raising wages to secure workers.
The Econoday Consensus Divergence Index stood at plus 10, above zero, which indicates the Japanese economy is performing better than expected after underperforming recently. Excluding the impact of inflation, the index was at plus 21.
Market Consensus Before Announcement
Consumer prices in Tokyo, the leading indicator of the national average, are expected to show slight easing in two key measures in March after their annual rates decelerated sharply to just above 3 percent in February from four-decade highs of over 4 percent the previous month as the government's program to provide subsidies to electricity and natural gas suppliers continues to lower utility charges.
The core CPI (excluding fresh food) is forecast to have risen 3.1 percent on year in March after rising 3.3% percent in February and 4.3 percent in January and the annual rate for the total CPI is also seen slowing to 3.2 percent from 3.4 percent while the increase in the core-core CPI (excluding fresh food and energy) -- a key indicator of the underlying trend of inflation -- is expected to accelerate to 3.3 percent from 3.2 percent.
The core CPI (excluding fresh food) is forecast to have risen 3.1 percent on year in March after rising 3.3% percent in February and 4.3 percent in January and the annual rate for the total CPI is also seen slowing to 3.2 percent from 3.4 percent while the increase in the core-core CPI (excluding fresh food and energy) -- a key indicator of the underlying trend of inflation -- is expected to accelerate to 3.3 percent from 3.2 percent.
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.
