| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - Y/Y | 2.8% | 2.6% to 3.0% | 2.8% | 2.9% |
| Ex-Fresh Food - Y/Y | 2.6% | 2.3% to 2.9% | 2.5% | 2.8% |
| Ex-Fresh Food & Energy - Y/Y | 4.0% | 3.8% to 4.0% | 3.8% | 4.0% |
Highlights
Consumer inflation in Tokyo, the leading indicator of the national average, eased to a 14-month low of 2.5 percent in September in the core CPI (excluding fresh food) and to a 12-month low of 2.8 percent in total CPI as utility charges fell at a faster pace and 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 also moderated to a three-month low of 3.8 percent in September from 4.0 percent in August, when it stayed at the 41-year high level first hit in July.
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.
Econoday's Relative Performance Index stood at minus 37, below zero, which indicates the Japanese economy is performing worse than expected after underperforming with a wider margin recently. Excluding the impact of inflation, the RPI was at minus 63.
The core consumer price index (excluding fresh food) in the capital's 23 wards rose 2.5 percent in September, coming in slightly below the median economist forecast of a 2.6 percent rise (forecasts ranged from 2.3 percent to 2.9 percent gains). It is the 25th straight year-over-year rise but the slowest in 14 months, since the 2.3 percent rise seen in July 2022. It followed increases of 2.8 percent in August, 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 3.2 percent from a year earlier in September, pushing up the Tokyo area total CPI by 1.33 percentage points, with the pace of increase decelerating further from 4.0 percent (a positive 1.64-point contribution) in August. The prices of services excluding owners' equivalent rent gained 2.9 percent on the year, adding 1.03 points to the CPI, after rising 3.0 percent (plus 1.07 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 3.8 percent on the year in September for the 18th straight rise. It was below the median forecast of a 4.0 percent rise. It followed increases of 4.0 percent in August, 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 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 as well as rising services costs.
The total CPI gained 2.8 percent on year in September, marking the 25th straight year-over-year gain. It was in line with the median forecast of a 2.8 percent rise (forecasts ranged from 2.6 percent to 3.0 percent gains). It is the slowest rise in 12 months, since the 2.8 percent gain in September 2022. It followed increases of 2.9 percent in August, 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 10.3 percent on year in September, pushing up the overall index by 0.42 percentage point. The pace of increase accelerated from a 4.2 percent rise and a 0.17-point contribution the previous month.
The prices for both fresh and processed food and beverages -- ranging from vegetables, meat and milk to buns, puddings and soft drinks -- continued pushing consumer inflation higher from year-earlier levels as many firms had raised prices to reflect higher costs seen earlier.
Food excluding perishables rose 8.5 percent on year (a 1.86-point contribution to the total CPI) in September after rising 8.9 percent in August with a 1.93-point contribution. This category replaced energy as the largest contributor to the CPI increase in October 2022 (1.27 points vs. 1.20 points) and the gap between the two has widened further as overall energy prices have eased from last year's high levels.
Energy prices slumped 18.7 percent on year in September, pushing down the total index by 1.10 percentage points, after falling 15.9 percent (minus 0.93 point) in August.
In the energy category, gasoline prices rose 10.0 percent on the year with a positive 0.06-point contribution to the total CPI in September, up further from a 9.1 percent rise (plus 0.06 point) in August. It reflects a rebound in crude oil import costs and the move by the Japanese government to scale back the subsides to refineries.
Electricity charges plunged 25.7 percent (minus 0.86 point) in September after dipping 22.3 percent (minus 0.74 point). The prices for natural gas supplied to homes via pipelines fell 17.1 percent (minus 0.31 point) after falling 14.0 percent (minus 0.25 point) the previous month. To help ease the pain of high costs for daily necessities, the government has been providing subsidies for electricity and natural gas since January (reflected in February bills onward). The program was scheduled to end in September but the government has decided to extend it through yearend.
The prices for household durable goods posted their 18th straight year-over-year increase in September but the pace of the increase slowed further to 0.5 percent with a 0.01-point contribution after rising 1.2 percent (plus 0.01 point) in August.
Accommodations costs maintained a high increase of 18.0 percent on the year with a positive 0.21-point contribution in September after an 18.1 percent rise (plus 0.24 point) in August, as pent-up demand for spending on services outpaced the slightly downward effects of travel subsidies.
The core-core CPI (excluding fresh food and energy) annual rate also moderated to a three-month low of 3.8 percent in September from 4.0 percent in August, when it stayed at the 41-year high level first hit in July.
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.
Econoday's Relative Performance Index stood at minus 37, below zero, which indicates the Japanese economy is performing worse than expected after underperforming with a wider margin recently. Excluding the impact of inflation, the RPI was at minus 63.
The core consumer price index (excluding fresh food) in the capital's 23 wards rose 2.5 percent in September, coming in slightly below the median economist forecast of a 2.6 percent rise (forecasts ranged from 2.3 percent to 2.9 percent gains). It is the 25th straight year-over-year rise but the slowest in 14 months, since the 2.3 percent rise seen in July 2022. It followed increases of 2.8 percent in August, 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 3.2 percent from a year earlier in September, pushing up the Tokyo area total CPI by 1.33 percentage points, with the pace of increase decelerating further from 4.0 percent (a positive 1.64-point contribution) in August. The prices of services excluding owners' equivalent rent gained 2.9 percent on the year, adding 1.03 points to the CPI, after rising 3.0 percent (plus 1.07 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 3.8 percent on the year in September for the 18th straight rise. It was below the median forecast of a 4.0 percent rise. It followed increases of 4.0 percent in August, 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 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 as well as rising services costs.
The total CPI gained 2.8 percent on year in September, marking the 25th straight year-over-year gain. It was in line with the median forecast of a 2.8 percent rise (forecasts ranged from 2.6 percent to 3.0 percent gains). It is the slowest rise in 12 months, since the 2.8 percent gain in September 2022. It followed increases of 2.9 percent in August, 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 10.3 percent on year in September, pushing up the overall index by 0.42 percentage point. The pace of increase accelerated from a 4.2 percent rise and a 0.17-point contribution the previous month.
The prices for both fresh and processed food and beverages -- ranging from vegetables, meat and milk to buns, puddings and soft drinks -- continued pushing consumer inflation higher from year-earlier levels as many firms had raised prices to reflect higher costs seen earlier.
Food excluding perishables rose 8.5 percent on year (a 1.86-point contribution to the total CPI) in September after rising 8.9 percent in August with a 1.93-point contribution. This category replaced energy as the largest contributor to the CPI increase in October 2022 (1.27 points vs. 1.20 points) and the gap between the two has widened further as overall energy prices have eased from last year's high levels.
Energy prices slumped 18.7 percent on year in September, pushing down the total index by 1.10 percentage points, after falling 15.9 percent (minus 0.93 point) in August.
In the energy category, gasoline prices rose 10.0 percent on the year with a positive 0.06-point contribution to the total CPI in September, up further from a 9.1 percent rise (plus 0.06 point) in August. It reflects a rebound in crude oil import costs and the move by the Japanese government to scale back the subsides to refineries.
Electricity charges plunged 25.7 percent (minus 0.86 point) in September after dipping 22.3 percent (minus 0.74 point). The prices for natural gas supplied to homes via pipelines fell 17.1 percent (minus 0.31 point) after falling 14.0 percent (minus 0.25 point) the previous month. To help ease the pain of high costs for daily necessities, the government has been providing subsidies for electricity and natural gas since January (reflected in February bills onward). The program was scheduled to end in September but the government has decided to extend it through yearend.
The prices for household durable goods posted their 18th straight year-over-year increase in September but the pace of the increase slowed further to 0.5 percent with a 0.01-point contribution after rising 1.2 percent (plus 0.01 point) in August.
Accommodations costs maintained a high increase of 18.0 percent on the year with a positive 0.21-point contribution in September after an 18.1 percent rise (plus 0.24 point) in August, as pent-up demand for spending on services outpaced the slightly downward effects of travel subsidies.
Market Consensus Before Announcement
Consumer inflation in Tokyo, the leading indicator of the national average, is forecast to ease to a 13-month low of 2.6 percent in September from 2.8 percent in August in the core CPI (excluding fresh food) and to a 12-month low of 2.8 percent from 2.9 percent the previous month in total CPI. Utility charges are estimated to have fallen at a faster pace and elevated processed food prices may be showing signs of peaking. The core-core CPI (excluding fresh food and energy) annual rate is expected to remain at a 41-year high of 4.0 percent in September, unchanged from August and July, as rising nominal wages amid labor shortages have led to higher costs for services.
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.
