| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - Y/Y | 3.0% | 2.7% to 3.3% | 2.9% | 3.2% |
| Ex-Fresh Food - Y/Y | 2.9% | 2.6% to 3.2% | 2.8% | 3.0% |
| Ex-Fresh Food & Energy - Y/Y | 4.1% | 3.8% to 4.2% | 4.0% | 4.0% |
Highlights
Consumer inflation in Tokyo, the leading indicator of the national average, moderated more than expected to 2.8 percent in August from 3.0 percent in July in the core CPI (excluding fresh food) and to 2.9 percent from 3.2 percent in total CPI, as utility charges fell at a faster pace and still elevated processed food prices showed signs of peaking, data from the Ministry of Internal Affairs and Communications released Friday showed.
The core-core CPI (excluding fresh food and energy) annual rate remained at a 41-year high of 4.0 percent in August, unchanged from July and coming in slightly softer than forecast.
In its quarterly Outlook Report for July, the Bank of Japan board revised up its forecast for consumer inflation measured in the core CPI for fiscal 2023 ending next March to 2.5 percent from 1.8 percent projected in April while predicting that inflation will lose some steam from 3.0 percent in fiscal 2022 and fail to be anchored around the bank's 2 percent target in a sustainable manner, averaging 1.9 percent (revised down from April's 2.0 percent) in fiscal 2024 and 1.6 percent (unchanged) in fiscal 2025.
The Econoday Consensus Divergence Index stood at plus 9, above zero, which indicates the Japanese economy is performing slightly better than expected. Excluding the impact of inflation, the index was also at plus 20.
The core consumer price index (excluding fresh food) in the capital's 23 wards rose 2.8 percent in August, coming in slightly below the median economist forecast of a 2.9 percent rise (forecasts ranged from 2.6 percent to 3.2 percent gains). It is the 24th straight year-over-year rise but the slowest in 11 months, since the 2.8 percent rise seen in September 2022. It followed increases of 3.0 percent in July, 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 4.0 percent from a year earlier in August, pushing up the Tokyo area total CPI by 1.63 percentage points, with the pace of increase decelerating from 4.5 percent (a positive 1.84-point contribution) in July. The prices of services excluding owners' equivalent rent gained 3.0 percent on the year, adding 1.07 points to the CPI, up further from a 2.9 percent increase (plus 1.03 points) the previous month. The uptrend in services costs reflects moves among many firms to raise wages at the fastest pace in 30 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 August for the 17th straight rise. It was also just below the median forecast of a 4.1 percent rise. It followed increases of 4.0 percent in July, 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 remains 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 2.9 percent on year in August, marking the 24th straight year-over-year gain and coming in below the median forecast of a 3.0 percent rise (forecasts ranged from 2.7 percent to 3.3 percent gains). It was the slowest rise in 11 months, since the 2.8 percent gain in September 2022. It followed increases of 3.2 percent each in July, 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 4.2 percent on year in August, pushing up the overall index by 0.17 percentage point. The pace of increase decelerated from a 6.6 percent rise and a 0.27-point contribution the previous month.
The prices for both fresh and processed food and beverages -- ranging from fish, meat and eggs to buns, puddings and beer -- continued pushing consumer inflation higher from year-earlier levels as many firms have been raising prices to reflect higher costs seen earlier.
The core-core CPI (excluding fresh food and energy) annual rate remained at a 41-year high of 4.0 percent in August, unchanged from July and coming in slightly softer than forecast.
In its quarterly Outlook Report for July, the Bank of Japan board revised up its forecast for consumer inflation measured in the core CPI for fiscal 2023 ending next March to 2.5 percent from 1.8 percent projected in April while predicting that inflation will lose some steam from 3.0 percent in fiscal 2022 and fail to be anchored around the bank's 2 percent target in a sustainable manner, averaging 1.9 percent (revised down from April's 2.0 percent) in fiscal 2024 and 1.6 percent (unchanged) in fiscal 2025.
The Econoday Consensus Divergence Index stood at plus 9, above zero, which indicates the Japanese economy is performing slightly better than expected. Excluding the impact of inflation, the index was also at plus 20.
The core consumer price index (excluding fresh food) in the capital's 23 wards rose 2.8 percent in August, coming in slightly below the median economist forecast of a 2.9 percent rise (forecasts ranged from 2.6 percent to 3.2 percent gains). It is the 24th straight year-over-year rise but the slowest in 11 months, since the 2.8 percent rise seen in September 2022. It followed increases of 3.0 percent in July, 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 4.0 percent from a year earlier in August, pushing up the Tokyo area total CPI by 1.63 percentage points, with the pace of increase decelerating from 4.5 percent (a positive 1.84-point contribution) in July. The prices of services excluding owners' equivalent rent gained 3.0 percent on the year, adding 1.07 points to the CPI, up further from a 2.9 percent increase (plus 1.03 points) the previous month. The uptrend in services costs reflects moves among many firms to raise wages at the fastest pace in 30 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 August for the 17th straight rise. It was also just below the median forecast of a 4.1 percent rise. It followed increases of 4.0 percent in July, 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 remains 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 2.9 percent on year in August, marking the 24th straight year-over-year gain and coming in below the median forecast of a 3.0 percent rise (forecasts ranged from 2.7 percent to 3.3 percent gains). It was the slowest rise in 11 months, since the 2.8 percent gain in September 2022. It followed increases of 3.2 percent each in July, 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 4.2 percent on year in August, pushing up the overall index by 0.17 percentage point. The pace of increase decelerated from a 6.6 percent rise and a 0.27-point contribution the previous month.
The prices for both fresh and processed food and beverages -- ranging from fish, meat and eggs to buns, puddings and beer -- continued pushing consumer inflation higher from year-earlier levels as many firms have been raising prices to reflect higher costs seen earlier.
Market Consensus Before Announcement
Consumer inflation in Tokyo, the leading indicator of the national average, is forecast to have moderated slightly to 2.9 percent in August from 3.0 percent in July in the core CPI (excluding fresh food) and to 3.0 percent from 3.2 percent in total CPI, as utility charges fell at a faster pace and the base effect of last year's mobile phone price hikes had waned. Amid lingering upward pressures on the costs for processed food, beverages and other daily necessities, the core-core CPI (excluding fresh food and energy) annual rate is seen ticking up to a fresh 41-year high of 4.1 percent in August from 4.0 percent in July but some forecasters project this narrow measure will also cool off slightly on easing import prices.
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.
