| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - Y/Y | 2.8% | 2.7% to 2.9% | 2.8% | 3.3% |
| Ex-Fresh Food - Y/Y | 2.5% | 2.5% to 2.6% | 2.5% | 2.9% |
| Ex-Fresh Food & Energy - Y/Y | 3.8% | 3.7% to 3.9% | 3.8% | 4.0% |
Highlights
Key points from Japan's November CPI data
--Core CPI annual rate decelerates to 16-month low of 2.5% on energy subsidies, hotel fees jump after rising to 2.9% in October
--Total CPI y/y rise also slows to 16-month low of 2.8% from 3.3% in October
--Core-core CPI (ex-fresh food, energy) annual rate eases further to 8-month low of 3.8% from 4.0% in October
Consumer inflation in Japan eased in November in all three key measures in line with consensus forecasts as markups in processed food had peaked and hotel fees jumped in reaction to a subsidized drop a year earlier, after the total and core readings picked up in October, when halved subsidies for electricity and natural gas utilities slowed the sharp drop in energy costs, data from the Ministry of Internal Affairs and Communication released Friday showed.
The core measure (excluding fresh food prices) rose 2.5 percent on the year, led by easing but still elevated prices for processed food and rising service costs amid labor shortages, after inching up to 2.9 percent in October from 2.8 percent in September. The pace of increase was the slowest in 16 months.
The year-over-year increase in the total CPI also slowed to a 16-month low of 2.8 percent after jumping to 3.3 percent in October from 3.0 percent in September, which was caused by a surge in fresh food prices.
Underlying inflation measured by the core-core CPI (excluding fresh food and energy) rose 3.8 percent, decelerating to an eight-month low from 4.0 percent in October, 4.2 percent in September and a 42-year high of 4.3 percent recorded in August, July and May.
In its quarterly Outlook Report for October, the Bank of Japan board revised up its core CPI forecast for fiscal 2023 ending next March further to 2.8 percent from 2.5 percent forecast in July, and jacked up its projection for fiscal 2024 to 2.8 percent from 1.9 percent. The board's median forecast for fiscal 2025 is 1.7 percent, revised up slightly from 1.6 percent, but that would be still below its 2 percent inflation target as the pass-through impact of high import costs is set to wane.
At its Dec. 18-19 meeting, the BoJ policy board voted unanimously to maintain its basic monetary easing stance under the seven-year-old yield curve control framework backed by large asset purchases, keeping its long-term interest rate target officially"around zero percent," with an actual upper limit around 1 percent, and the target for the overnight rate at minus 0.1 percent, in a decade-long campaign to achieve stable 2 percent inflation with sustainable wage growth. The board also retained its guidance that it will"patiently continue with monetary easing" in order to"achieve the price stability target of 2 percent in a sustainable and stable manner, accompanied by wage increases."
Econoday's Relative Performance Index (RPI) stood at plus 31, comfortably above zero, which indicates the Japanese economy is performing better than expected after outperforming with a narrower margin recently. Excluding the impact of inflation, the RPI was at plus 40.
The national average core consumer price index (excluding fresh food) rose 2.5 percent from a year earlier in November in line with the median economist forecast of a 2.5 percent rise (forecasts ranged from 2.5 percent to 2.6 percent). It is the 27th straight year-over-year increase but the slowest since a 2.4 percent rise in July 2022. Previously, the core CPI rose 2.9 percent in October, 2.8 percent in September, 3.1 percent in both August and July and 3.3 percent in June. The slowdown to 3.3 percent in February was the first deceleration in 13 months after rising to 4.2 percent in January from 4.0 percent the previous month.
The 4.2 percent rise in January was a 41-year high, the largest increase since the 4.2 percent gain in September 1981, with or without the direct impact of the sales tax hikes in 2014 (from 5 percent to 8 percent) and in 1997 (from 3 percent to 5 percent) and the introduction of the sales tax in 1989. The tax was further raised to 10 percent in 2019 but had only a limited impact on prices.
As seen in Tokyo CPI data, the leading indicator of the national average, the pace of increase in services costs exceeded that of goods prices in November, although the latter's contribution to the total CPI is still larger than the former's. Service prices in Japan have been on the rise in recent months as more firms are raising wages to secure workers but real wages are still more than 2 percent below year-earlier levels.
Service prices excluding owners' equivalent rent rose 3.4 percent on the year in November, pushing up the total CPI by 1.06 percentage point, after rising 3.1 percent in October (plus 0.98 point), 2.9 percent in September and 3.0 percent in August. Goods prices excluding fresh food gained 2.7 percent (plus 1.33-point contribution), slowing from 3.6 percent in October (plus 1.74 points), 3.5 percent in September and 4.1 percent in August.
The underlying inflation rate -- measured by the core-core CPI (excluding fresh food and energy) -- rose 3.8 percent on the year in November, following increases of 4.0 percent in October, 4.2 percent in September, 4.3 percent in both August and July, 4.2 percent in June, 4.3 percent in May and 4.1 percent in April. It is the 20th straight year-over-year increase but remains the slowest since the 3.8 percent gain in March 2023. It was in line with the median economist forecast of a 3.8 percent rise (forecasts ranged from 3.7 percent to 3.9 percent). The 4.3 percent rise was the largest in 42 years, since the 4.5 percent increase June 1981. This narrow measure is without the effects of energy cost fluctuations but it had been pushed up by markups in various items including processed food.
The total CPI rose 2.8 percent on year in November for the 27th consecutive year-over-year increase following increases of 3.3 percent in October, 3.0 percent in September, 3.2 percent in August and 3.3 percent in both July and June. It was also in line with the median forecast of a 2.8 percent rise (forecasts ranged from 2.7 percent to 2.9 percent gains). Fresh food prices, a volatile factor, rose 10.4 percent on year and pushed up the overall index by 0.43 percentage point after surging 14.1 percent (up 0.59 point) the previous month. The 4.3 percent increase in January's total CPI was a 41-year high, the largest since the 4.3 percent rise in December 1981.
--Core CPI annual rate decelerates to 16-month low of 2.5% on energy subsidies, hotel fees jump after rising to 2.9% in October
--Total CPI y/y rise also slows to 16-month low of 2.8% from 3.3% in October
--Core-core CPI (ex-fresh food, energy) annual rate eases further to 8-month low of 3.8% from 4.0% in October
Consumer inflation in Japan eased in November in all three key measures in line with consensus forecasts as markups in processed food had peaked and hotel fees jumped in reaction to a subsidized drop a year earlier, after the total and core readings picked up in October, when halved subsidies for electricity and natural gas utilities slowed the sharp drop in energy costs, data from the Ministry of Internal Affairs and Communication released Friday showed.
The core measure (excluding fresh food prices) rose 2.5 percent on the year, led by easing but still elevated prices for processed food and rising service costs amid labor shortages, after inching up to 2.9 percent in October from 2.8 percent in September. The pace of increase was the slowest in 16 months.
The year-over-year increase in the total CPI also slowed to a 16-month low of 2.8 percent after jumping to 3.3 percent in October from 3.0 percent in September, which was caused by a surge in fresh food prices.
Underlying inflation measured by the core-core CPI (excluding fresh food and energy) rose 3.8 percent, decelerating to an eight-month low from 4.0 percent in October, 4.2 percent in September and a 42-year high of 4.3 percent recorded in August, July and May.
In its quarterly Outlook Report for October, the Bank of Japan board revised up its core CPI forecast for fiscal 2023 ending next March further to 2.8 percent from 2.5 percent forecast in July, and jacked up its projection for fiscal 2024 to 2.8 percent from 1.9 percent. The board's median forecast for fiscal 2025 is 1.7 percent, revised up slightly from 1.6 percent, but that would be still below its 2 percent inflation target as the pass-through impact of high import costs is set to wane.
At its Dec. 18-19 meeting, the BoJ policy board voted unanimously to maintain its basic monetary easing stance under the seven-year-old yield curve control framework backed by large asset purchases, keeping its long-term interest rate target officially"around zero percent," with an actual upper limit around 1 percent, and the target for the overnight rate at minus 0.1 percent, in a decade-long campaign to achieve stable 2 percent inflation with sustainable wage growth. The board also retained its guidance that it will"patiently continue with monetary easing" in order to"achieve the price stability target of 2 percent in a sustainable and stable manner, accompanied by wage increases."
Econoday's Relative Performance Index (RPI) stood at plus 31, comfortably above zero, which indicates the Japanese economy is performing better than expected after outperforming with a narrower margin recently. Excluding the impact of inflation, the RPI was at plus 40.
The national average core consumer price index (excluding fresh food) rose 2.5 percent from a year earlier in November in line with the median economist forecast of a 2.5 percent rise (forecasts ranged from 2.5 percent to 2.6 percent). It is the 27th straight year-over-year increase but the slowest since a 2.4 percent rise in July 2022. Previously, the core CPI rose 2.9 percent in October, 2.8 percent in September, 3.1 percent in both August and July and 3.3 percent in June. The slowdown to 3.3 percent in February was the first deceleration in 13 months after rising to 4.2 percent in January from 4.0 percent the previous month.
The 4.2 percent rise in January was a 41-year high, the largest increase since the 4.2 percent gain in September 1981, with or without the direct impact of the sales tax hikes in 2014 (from 5 percent to 8 percent) and in 1997 (from 3 percent to 5 percent) and the introduction of the sales tax in 1989. The tax was further raised to 10 percent in 2019 but had only a limited impact on prices.
As seen in Tokyo CPI data, the leading indicator of the national average, the pace of increase in services costs exceeded that of goods prices in November, although the latter's contribution to the total CPI is still larger than the former's. Service prices in Japan have been on the rise in recent months as more firms are raising wages to secure workers but real wages are still more than 2 percent below year-earlier levels.
Service prices excluding owners' equivalent rent rose 3.4 percent on the year in November, pushing up the total CPI by 1.06 percentage point, after rising 3.1 percent in October (plus 0.98 point), 2.9 percent in September and 3.0 percent in August. Goods prices excluding fresh food gained 2.7 percent (plus 1.33-point contribution), slowing from 3.6 percent in October (plus 1.74 points), 3.5 percent in September and 4.1 percent in August.
The underlying inflation rate -- measured by the core-core CPI (excluding fresh food and energy) -- rose 3.8 percent on the year in November, following increases of 4.0 percent in October, 4.2 percent in September, 4.3 percent in both August and July, 4.2 percent in June, 4.3 percent in May and 4.1 percent in April. It is the 20th straight year-over-year increase but remains the slowest since the 3.8 percent gain in March 2023. It was in line with the median economist forecast of a 3.8 percent rise (forecasts ranged from 3.7 percent to 3.9 percent). The 4.3 percent rise was the largest in 42 years, since the 4.5 percent increase June 1981. This narrow measure is without the effects of energy cost fluctuations but it had been pushed up by markups in various items including processed food.
The total CPI rose 2.8 percent on year in November for the 27th consecutive year-over-year increase following increases of 3.3 percent in October, 3.0 percent in September, 3.2 percent in August and 3.3 percent in both July and June. It was also in line with the median forecast of a 2.8 percent rise (forecasts ranged from 2.7 percent to 2.9 percent gains). Fresh food prices, a volatile factor, rose 10.4 percent on year and pushed up the overall index by 0.43 percentage point after surging 14.1 percent (up 0.59 point) the previous month. The 4.3 percent increase in January's total CPI was a 41-year high, the largest since the 4.3 percent rise in December 1981.
Market Consensus Before Announcement
Consumer inflation in Japan is forecast to have eased in November in all three key measures as markups in processed food had peaked and hotel fees rose in reaction to a subsidized drop a year earlier, after the total and core readings picked up in October, when halved subsidies for electricity and natural gas utilities slowed the sharp drop in energy costs.
The core measure (excluding fresh food prices but including energy) is seen up 2.5 percent on the year, led by elevated prices for processed food and rising service costs amid labor shortages, after rising to 2.9 percent in October from 2.8 percent in September. The year-over-year increase in the total CPI is also expected to have slowed to 2.8 percent after jumping to 3.3 percent in October from 3.0 percent in September, led also by a surge in fresh food prices. Underlying inflation measured by the core-core CPI (excluding fresh food and energy) is forecast at 3.8 percent, down further from 4.0 percent in October, 4.2 percent in September and a 42-year high of 4.3 percent recorded in August, July and May.
The core measure (excluding fresh food prices but including energy) is seen up 2.5 percent on the year, led by elevated prices for processed food and rising service costs amid labor shortages, after rising to 2.9 percent in October from 2.8 percent in September. The year-over-year increase in the total CPI is also expected to have slowed to 2.8 percent after jumping to 3.3 percent in October from 3.0 percent in September, led also by a surge in fresh food prices. Underlying inflation measured by the core-core CPI (excluding fresh food and energy) is forecast at 3.8 percent, down further from 4.0 percent in October, 4.2 percent in September and a 42-year high of 4.3 percent recorded in August, July and May.
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.
Description
The CPI has been in the spotlight as Japan struggled to make its way out of deflation. 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.
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.
