| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| CPI - Y/Y | 3.0% | 2.7% to 3.0% | 2.6% | 3.3% | 3.2% |
| Ex-Fresh Food - Y/Y | 2.4% | 2.2% to 2.6% | 2.3% | 2.7% | |
| Ex-Fresh Food & Energy - Y/Y | 3.7% | 3.5% to 3.8% | 3.6% | 3.8% |
Highlights
Key points from central Tokyo CPI data:
--Japan November Tokyo core CPI annual rate eases as processed food markups have peaked, hotel fees jump in reaction to last year's subsidized drop
--Services costs now rising faster than goods prices amid wage hikes
--Core CPI (ex-fresh food) +2.3% y/y vs. +2.7% in October
--Total CPI +2.6% vs. +3.2% on lower fresh food price rise after October's spike
--Core-Core CPI (ex-fresh food, energy) moderates to +3.6% from +3.8%
Consumer inflation in Tokyo, the leading indicator of the national average, eased at a faster pace than expected in November as markups in processed food had peaked and hotel fees rose in reaction to a subsidized drop a year earlier, following an uptick 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 Communications released Tuesday showed.
The upward pressure from services costs is now higher than that from goods prices, indicating the effects of a spike in energy and commodities prices caused by the pandemic-era global supply chain breakdowns and geopolitical risks are waning.
The core CPI (excluding fresh food), which is closely watched by Bank of Japan policymakers, posted a 17-month low of a 2.3 percent rise on year, slowing from 2.7 percent in October and 2.5 percent in September.
The year-over-year rise in the total CPI also slipped back to a 17-month low of 2.6 percent after rising to 3.3 percent in October from 2.8 percent in September.
The core-core CPI (excluding fresh food and energy) annual rate eased to an eight-month low of 3.6 percent from 3.8 percent in October, 3.9 percent in September and a 41-year high of 4.0 percent hit in August and July.
Econoday's Relative Performance Index stood at zero, which indicates the Japanese economy is performing as largely expected after underperforming slightly. Excluding the impact of inflation, the RPI was at plus 30.
The core consumer price index (excluding fresh food) in the capital's 23 wards rose 2.3 percent in November, just below the median economist forecast of a 2.4 percent rise (forecasts ranged from 2.2 percent to 2.6 percent gains). It is the 27th straight year-over-year rise but the slowest since the 2.3 percent rise in July 2022. It followed increases of 2.7 percent in October, 2.5 percent in September, 2.8 percent in August and 3.0 percent in July. It eased sharply to 3.2 percent in February from 4.3 percent in January as the effects of government subsidies for electricity and natural gas utilities kicked in.
The surge in January is the fastest in more than 41 years, since 4.3 percent 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 2.3 percent from a year earlier in November, pushing up the Tokyo area total CPI by 0.98 percentage points, with the pace of increase much slower than a 3.4 percent rise (a positive 1.41-point contribution) in October, when they picked up after a recent slowdown. The prices of services excluding owners' equivalent rent gained 3.6 percent on the year, adding 1.24 points to the CPI, accelerating from a 3.3 percent rise (plus 1.15 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 3.6 percent on the year in November for the 20th straight rise, coming in just below the median forecast of a 3.7 percent rise (forecasts ranged from 3.5 percent to 3.8 percent). It was the slowest gain since the 3.4 percent rise in March 2023 and followed increases of 3.8 percent in October, 3.9 percent in September, 4.0 percent in August and in July and 3.8 percent in June and 3.0 percent at the start of the year.
The 4.0 percent gain in the narrow core 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 rose 2.6 percent on year in November, marking the 27th straight year-over-year gain but easing from October's revised 3.2 percent increase (the fastest rise since 3.5 percent in April) to the slowest pace since the 2.5 percent gain in July 2022. It was well below the median forecast of a 3.0 percent rise (forecasts ranged from 2.7 percent to 3.0 percent gains). Previously, the index rose 2.8 percent in September (the slowest since 2.8 percent in September 2022), 2.9 percent in August and 3.2 percent in July and June. The annual rate fell to 3.4 percent in February from 4.4 percent in January, which is the largest increase in more than 41 years, since the 4.8 percent gain in June 1981.
Fresh food prices, a volatile factor, rose 9.4 percent on year in November, pushing up the overall index by 0.38 percentage point. The pace of increase decelerated from a revised 16.4 percent spike and a 0.67-point contribution the previous month, and thus helping slow the total CPI increase.
--Japan November Tokyo core CPI annual rate eases as processed food markups have peaked, hotel fees jump in reaction to last year's subsidized drop
--Services costs now rising faster than goods prices amid wage hikes
--Core CPI (ex-fresh food) +2.3% y/y vs. +2.7% in October
--Total CPI +2.6% vs. +3.2% on lower fresh food price rise after October's spike
--Core-Core CPI (ex-fresh food, energy) moderates to +3.6% from +3.8%
Consumer inflation in Tokyo, the leading indicator of the national average, eased at a faster pace than expected in November as markups in processed food had peaked and hotel fees rose in reaction to a subsidized drop a year earlier, following an uptick 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 Communications released Tuesday showed.
The upward pressure from services costs is now higher than that from goods prices, indicating the effects of a spike in energy and commodities prices caused by the pandemic-era global supply chain breakdowns and geopolitical risks are waning.
The core CPI (excluding fresh food), which is closely watched by Bank of Japan policymakers, posted a 17-month low of a 2.3 percent rise on year, slowing from 2.7 percent in October and 2.5 percent in September.
The year-over-year rise in the total CPI also slipped back to a 17-month low of 2.6 percent after rising to 3.3 percent in October from 2.8 percent in September.
The core-core CPI (excluding fresh food and energy) annual rate eased to an eight-month low of 3.6 percent from 3.8 percent in October, 3.9 percent in September and a 41-year high of 4.0 percent hit in August and July.
Econoday's Relative Performance Index stood at zero, which indicates the Japanese economy is performing as largely expected after underperforming slightly. Excluding the impact of inflation, the RPI was at plus 30.
The core consumer price index (excluding fresh food) in the capital's 23 wards rose 2.3 percent in November, just below the median economist forecast of a 2.4 percent rise (forecasts ranged from 2.2 percent to 2.6 percent gains). It is the 27th straight year-over-year rise but the slowest since the 2.3 percent rise in July 2022. It followed increases of 2.7 percent in October, 2.5 percent in September, 2.8 percent in August and 3.0 percent in July. It eased sharply to 3.2 percent in February from 4.3 percent in January as the effects of government subsidies for electricity and natural gas utilities kicked in.
The surge in January is the fastest in more than 41 years, since 4.3 percent 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 2.3 percent from a year earlier in November, pushing up the Tokyo area total CPI by 0.98 percentage points, with the pace of increase much slower than a 3.4 percent rise (a positive 1.41-point contribution) in October, when they picked up after a recent slowdown. The prices of services excluding owners' equivalent rent gained 3.6 percent on the year, adding 1.24 points to the CPI, accelerating from a 3.3 percent rise (plus 1.15 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 3.6 percent on the year in November for the 20th straight rise, coming in just below the median forecast of a 3.7 percent rise (forecasts ranged from 3.5 percent to 3.8 percent). It was the slowest gain since the 3.4 percent rise in March 2023 and followed increases of 3.8 percent in October, 3.9 percent in September, 4.0 percent in August and in July and 3.8 percent in June and 3.0 percent at the start of the year.
The 4.0 percent gain in the narrow core 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 rose 2.6 percent on year in November, marking the 27th straight year-over-year gain but easing from October's revised 3.2 percent increase (the fastest rise since 3.5 percent in April) to the slowest pace since the 2.5 percent gain in July 2022. It was well below the median forecast of a 3.0 percent rise (forecasts ranged from 2.7 percent to 3.0 percent gains). Previously, the index rose 2.8 percent in September (the slowest since 2.8 percent in September 2022), 2.9 percent in August and 3.2 percent in July and June. The annual rate fell to 3.4 percent in February from 4.4 percent in January, which is the largest increase in more than 41 years, since the 4.8 percent gain in June 1981.
Fresh food prices, a volatile factor, rose 9.4 percent on year in November, pushing up the overall index by 0.38 percentage point. The pace of increase decelerated from a revised 16.4 percent spike and a 0.67-point contribution the previous month, and thus helping slow the total CPI increase.
Market Consensus Before Announcement
Consumer inflation in Tokyo, the leading indicator of the national average, is forecast to ease in November as markups in processed food had peaked and hotel fees rose in reaction to a subsidized drop seen a year earlier, following an unexpected uptick in October, when halved subsidies for electricity and natural gas utilities slowed the recent sharp drop in overall energy costs.
The core CPI (excluding fresh food), which is closely watched by Bank of Japan policymakers, is expected to post a 17-month low of a 2.4 percent rise on year, slowing from 2.7 percent in October and 2.5 percent in September. The year-over-year rise in the total CPI is also seen slipping back to 3.0 percent after rising to 3.3 percent in October from 2.8 percent in September. The core-core CPI (excluding fresh food and energy) annual rate is expected to ease to an eight-month low of 3.7 percent from 3.8 percent in October, 3.9 percent in September and a 41-year high of 4.0 percent hit in August and July.
The core CPI (excluding fresh food), which is closely watched by Bank of Japan policymakers, is expected to post a 17-month low of a 2.4 percent rise on year, slowing from 2.7 percent in October and 2.5 percent in September. The year-over-year rise in the total CPI is also seen slipping back to 3.0 percent after rising to 3.3 percent in October from 2.8 percent in September. The core-core CPI (excluding fresh food and energy) annual rate is expected to ease to an eight-month low of 3.7 percent from 3.8 percent in October, 3.9 percent in September and a 41-year high of 4.0 percent hit in August and July.
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.
