| Previous | Consensus | Consensus Range | Actual | Revised | |
|---|---|---|---|---|---|
| CPI - M/M | 0.2% | ||||
| CPI - Y/Y | 3.1% | 2.9% | 2.8% to 3.2% | 3.2% | 3.2% |
| Ex-Fresh Food - M/M | 0.3% | ||||
| Ex-Fresh Food - Y/Y | 3.2% | 3.0% | 2.8% to 3.3% | 3.0% | |
| Ex-Fresh Food & Energy - M/M | 0.2% | ||||
| Ex-Fresh Food & Energy - Y/Y | 3.8% | 3.8% | 3.6% to 3.9% | 4.0% |
Highlights
Consumer inflation in Tokyo, the leading indicator of the national average, edged lower to 3.0 percent in July from 3.2 percent in June in the core CPI (excluding fresh food) and was steady at 3.2 percent in total CPI, as utility charges fell at a faster pace and the base effect of mobile phone price hikes a year earlier waned, data from the Ministry of Internal Affairs and Communications released Friday showed.
Amid continued markups in processed food and beverage prices, the core-core CPI (excluding fresh food and energy) annual rate rose to a fresh 41-year high of 4.0 percent in July from 3.8 percent in June.
The Econoday Consensus Divergence Index stood at minus 17, below zero, which indicates the Japanese economy is performing slightly worse than expected. Excluding the impact of inflation, the index was also at minus 17.
The core consumer price index (excluding fresh food) in the capital's 23 wards rose 3.0 percent in June, coming in line with the median economist forecast of a 3.0 percent rise (forecasts ranged from 2.8 percent to 3.3 percent). It is the 23rd straight year-over-year rise after rising 3.2 percent in June, 3.1 percent in May, 3.5 percent in April, 3.2 percent in March, 3.3 percent in February and 4.3 percent in January.
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 prices of goods excluding fresh food rose 4.5 percent from a year earlier in July, pushing up the Tokyo area total CPI by 1.84 percentage points, with the pace of increase decelerating from 5.4 percent (a positive 2.20-point contribution) in May. The prices of services excluding owners' equivalent rent gained 2.9 percent on the year, adding 1.03 point to the CPI, up from 2.4 percent (plus 0.84 point). The uptrend reflects moves among many firms to raise wages at a faster pace than in recent years to secure workers.
The core-core CPI (excluding fresh food and energy) -- a key indicator of the underlying trend of inflation -- rose 4.0 percent on the year in July for the 16th straight rise. It was above the median forecast of a 3.8 percent rise. It followed increases of 3.8 percent in June, 3.9 percent in May, 3.8 percent in April, 3.4 percent in March, 3.1 percent in February and 3.0 percent in January. The 4.0 percent gain in July is the highest in 41 years, since the 4.2 percent rise in April 1982. This measure is not affected by fluctuations in energy prices but it has been on an uptrend in the face of markups in processed food and durable goods.
The total CPI gained 3.2 percent on year in July, marking the 23rd straight year-over-year gain and coming in above the median forecast of a 2.9 percent rise (forecasts ranged from 2.8 percent to 3.2 percent). It followed increases of 3.2 percent in June and May, 3.5 percent in April, 3.3 percent in March, 3.4 percent in February and 4.4 percent in January. 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 7.0 percent on year in June, pushing up the overall index by 0.28 percentage point. The pace of increase accelerated from a 3.2 percent rise and a 0.13-point contribution the previous month.
Amid continued markups in processed food and beverage prices, the core-core CPI (excluding fresh food and energy) annual rate rose to a fresh 41-year high of 4.0 percent in July from 3.8 percent in June.
The Econoday Consensus Divergence Index stood at minus 17, below zero, which indicates the Japanese economy is performing slightly worse than expected. Excluding the impact of inflation, the index was also at minus 17.
The core consumer price index (excluding fresh food) in the capital's 23 wards rose 3.0 percent in June, coming in line with the median economist forecast of a 3.0 percent rise (forecasts ranged from 2.8 percent to 3.3 percent). It is the 23rd straight year-over-year rise after rising 3.2 percent in June, 3.1 percent in May, 3.5 percent in April, 3.2 percent in March, 3.3 percent in February and 4.3 percent in January.
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 prices of goods excluding fresh food rose 4.5 percent from a year earlier in July, pushing up the Tokyo area total CPI by 1.84 percentage points, with the pace of increase decelerating from 5.4 percent (a positive 2.20-point contribution) in May. The prices of services excluding owners' equivalent rent gained 2.9 percent on the year, adding 1.03 point to the CPI, up from 2.4 percent (plus 0.84 point). The uptrend reflects moves among many firms to raise wages at a faster pace than in recent years to secure workers.
The core-core CPI (excluding fresh food and energy) -- a key indicator of the underlying trend of inflation -- rose 4.0 percent on the year in July for the 16th straight rise. It was above the median forecast of a 3.8 percent rise. It followed increases of 3.8 percent in June, 3.9 percent in May, 3.8 percent in April, 3.4 percent in March, 3.1 percent in February and 3.0 percent in January. The 4.0 percent gain in July is the highest in 41 years, since the 4.2 percent rise in April 1982. This measure is not affected by fluctuations in energy prices but it has been on an uptrend in the face of markups in processed food and durable goods.
The total CPI gained 3.2 percent on year in July, marking the 23rd straight year-over-year gain and coming in above the median forecast of a 2.9 percent rise (forecasts ranged from 2.8 percent to 3.2 percent). It followed increases of 3.2 percent in June and May, 3.5 percent in April, 3.3 percent in March, 3.4 percent in February and 4.4 percent in January. 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 7.0 percent on year in June, pushing up the overall index by 0.28 percentage point. The pace of increase accelerated from a 3.2 percent rise and a 0.13-point contribution the previous month.
Market Consensus Before Announcement
Consumer inflation in Tokyo, the leading indicator of the national average, is forecast to have edged lower to 3.0 percent in July from 3.2 percent in June in the core CPI (excluding fresh food) and to 2.9 percent from 3.1 percent in total CPI despite continued upward pressures from processed food prices, after electricity charge markups led to a smaller drop in overall energy costs and pushed up the inflation rate slightly in June. The core-core CPI (excluding fresh food and energy) annual rate is seen unchanged at 3.8% in July after decelerating slightly to the rate in June from 3.9% in May as gains in household durable goods and hotel fees eased.
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.
