| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - Y/Y | 2.4% | 2.3% to 2.7% | 2.5% | 3.0% |
| Ex-Fresh Food - Y/Y | 2.3% | 2.1% to 2.5% | 2.4% | 2.8% |
| Ex-Fresh Food & Energy - Y/Y | 2.0% | 2.0% to 2.1% | 2.1% | 2.0% |
Highlights
Consumer inflation in Japan decelerated to a five-month low of 2.4% in the core reading in September (vs. consensus 2.3%) after accelerating to 2.8% in August from 2.7% in July. The government temporarily resumed utility subsidies help ease inflation for three months, starting with electricity and natural gas bill payments in September.
The Bank of Japan is focused on medium-term inflation outlook. Its process of raising interest rates gradually toward more normal levels from around zero is not dictated by short-term fluctuations in CPI data.
The year-on-year increase in the total CPI stood at 2.5%, down from 3.0% in August (consensus 2.4%). Underlying inflation measured by the core-core CPI (excluding fresh food and energy) rose slightly to 2.1% from 2.0% the previous month (consensus 2.0%).
The slower total and core CPI was led by overall energy prices +6.0% (contribution +0.44 percentage point) in September vs. +12.0% (+0.90 point) in August; durable goods (including air conditioners) +6.5% (+0.09 point) +7.7% (+0.11 point). It was partially offset by the y/y ate of processed food prices +3.1% (+0.73 point) vs. +2.9% (+0.69 point). The slowdown was also due to a smaller 6.8% rise (+0.07 point) in hotel fees vs. +9.5% (+0.12 point).
The Bank of Japan is focused on medium-term inflation outlook. Its process of raising interest rates gradually toward more normal levels from around zero is not dictated by short-term fluctuations in CPI data.
The year-on-year increase in the total CPI stood at 2.5%, down from 3.0% in August (consensus 2.4%). Underlying inflation measured by the core-core CPI (excluding fresh food and energy) rose slightly to 2.1% from 2.0% the previous month (consensus 2.0%).
The slower total and core CPI was led by overall energy prices +6.0% (contribution +0.44 percentage point) in September vs. +12.0% (+0.90 point) in August; durable goods (including air conditioners) +6.5% (+0.09 point) +7.7% (+0.11 point). It was partially offset by the y/y ate of processed food prices +3.1% (+0.73 point) vs. +2.9% (+0.69 point). The slowdown was also due to a smaller 6.8% rise (+0.07 point) in hotel fees vs. +9.5% (+0.12 point).
Market Consensus Before Announcement
Consumer inflation in Japan is expected to decelerate to 2.3% in the core reading in September after accelerating to 2.8% in August from 2.7% in July. The government temporarily resumed utility subsidies help ease inflation for three months, starting with electricity and natural gas bill payments in September.
The year-on-year increase in the total CPI is forecast at 2.4%, down from 3.0% in August. Underlying inflation measured by the core-core CPI (excluding fresh food and energy) is seen at 2.0%, unchanged from 2.0% the previous month.
The Bank of Japan is focused on medium-term inflation outlook. Its process of raising interest rates gradually toward more normal levels from around zero is not dictated by short-term fluctuations in CPI data.
The year-on-year increase in the total CPI is forecast at 2.4%, down from 3.0% in August. Underlying inflation measured by the core-core CPI (excluding fresh food and energy) is seen at 2.0%, unchanged from 2.0% the previous month.
The Bank of Japan is focused on medium-term inflation outlook. Its process of raising interest rates gradually toward more normal levels from around zero is not dictated by short-term fluctuations in CPI data.
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.
