| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - Y/Y | 3.4% | 3.0% to 3.6% | 3.5% | 2.9% |
| Ex-Fresh Food - Y/Y | 3.2% | 2.6% to 3.2% | 3.4% | 2.4% |
| Ex-Fresh Food & Energy - Y/Y | 2.8% | 2.3% to 3.0% | 3.1% | 2.2% |
Highlights
Consumer inflation in Tokyo, the leading indicator of the national average, soared in April as the price-cutting base-year effect of free high school education in the capital has waned and after the government halved its wintertime utility subsidies in March, the last of the three-month period (bills are paid from February to April). Many firms planned to raise their retail prices at the April 1 start of the fiscal year, more so this year amid high wage hikes, while processed food costs remain elevated on the lingering effects of rice shortages.
The core reading (excluding fresh food) surged to a 24-month high of a 3.4% rise on year after accelerating slightly to 2.4% in March from 2.2% in February. The year-on-year rise in the total CPI also jumped to a 24-month high of 3.5% after inching up to 2.9% from 2.8%. Even the annual rate for the core-core CPI (excluding fresh food and energy), which has been little affected by fluctuations in gasoline and heating oil prices, rose to a 14-month high of 3.1% from 2.2% the previous month.
Energy costs rose 9.4% on year (+6.1% in the prior month), adding 0.47 percentage point to the total CPI (vs. +0.30 point), while processed food prices gained 6.4% (vs. +5.6%), lifting the index by a much wider 1.47 points (vs. +1.28 points). The biggest contributor to the wider gap between the 3.5% y/y total CPI rate in April and 2.9% in March was private high school tuition fees that rose 1.9% on year (zero contribution) in April vs. a 61.7% plunge (negative 0.39 point) in March. There was a rare mention of the prices for cat food, which jumped 37.0% (+0.05 point), accelerating from a 6.7% climb (+0.01 point).
In April 2024, consumer inflation in central Tokyo's 23 wards decelerated much faster than expected (the core CPI annual rate slowed to 1.6% from 2.4% in March) as completely free high school education took effect in the Tokyo metropolitan area, pushing down the CPI by 0.51 percentage points. The national government had been providing subsides to slash high school tuition fees but the Tokyo prefectural government added its own financial support, removing the upper limit on household income from eligibility conditions and effectively making all public and private tuition free for grade 10 to 12 students.
Despite downside risks to global growth triggered by the protectionist trade policy under the current U.S. administration, Bank of Japan policymakers are seeking to normalize the bank's policy stance further by lifting super-low short-term interest rates at least 1% from 0.5% now.
At its next meeting on April 30-May 1, the Bank of Japan's nine-member board is expected to remain cautious amid high uncertainty over a global trade war, after having decided unanimously to maintain the target for overnight interest rate at 0.5% in March. Previously, the panel voted 8 to 1 to raise the policy rate by another 25 basis points to 0.5% in January in a third rate hike during the current normalization process that began in March 2024. Members are closely monitoring whether expected high wage increases by major firms will spread to smaller firms in fiscal 2025 that began on April 1 at a time when real wages are falling, which could hurt consumption further and generate deflationary pressures.
The core reading (excluding fresh food) surged to a 24-month high of a 3.4% rise on year after accelerating slightly to 2.4% in March from 2.2% in February. The year-on-year rise in the total CPI also jumped to a 24-month high of 3.5% after inching up to 2.9% from 2.8%. Even the annual rate for the core-core CPI (excluding fresh food and energy), which has been little affected by fluctuations in gasoline and heating oil prices, rose to a 14-month high of 3.1% from 2.2% the previous month.
Energy costs rose 9.4% on year (+6.1% in the prior month), adding 0.47 percentage point to the total CPI (vs. +0.30 point), while processed food prices gained 6.4% (vs. +5.6%), lifting the index by a much wider 1.47 points (vs. +1.28 points). The biggest contributor to the wider gap between the 3.5% y/y total CPI rate in April and 2.9% in March was private high school tuition fees that rose 1.9% on year (zero contribution) in April vs. a 61.7% plunge (negative 0.39 point) in March. There was a rare mention of the prices for cat food, which jumped 37.0% (+0.05 point), accelerating from a 6.7% climb (+0.01 point).
In April 2024, consumer inflation in central Tokyo's 23 wards decelerated much faster than expected (the core CPI annual rate slowed to 1.6% from 2.4% in March) as completely free high school education took effect in the Tokyo metropolitan area, pushing down the CPI by 0.51 percentage points. The national government had been providing subsides to slash high school tuition fees but the Tokyo prefectural government added its own financial support, removing the upper limit on household income from eligibility conditions and effectively making all public and private tuition free for grade 10 to 12 students.
Despite downside risks to global growth triggered by the protectionist trade policy under the current U.S. administration, Bank of Japan policymakers are seeking to normalize the bank's policy stance further by lifting super-low short-term interest rates at least 1% from 0.5% now.
At its next meeting on April 30-May 1, the Bank of Japan's nine-member board is expected to remain cautious amid high uncertainty over a global trade war, after having decided unanimously to maintain the target for overnight interest rate at 0.5% in March. Previously, the panel voted 8 to 1 to raise the policy rate by another 25 basis points to 0.5% in January in a third rate hike during the current normalization process that began in March 2024. Members are closely monitoring whether expected high wage increases by major firms will spread to smaller firms in fiscal 2025 that began on April 1 at a time when real wages are falling, which could hurt consumption further and generate deflationary pressures.
Market Consensus Before Announcement
Consumer inflation in Tokyo, the leading indicator of the national average, is expected to soar in April as the price-cutting base-year effect of free high school education in the capital has waned and after the government halved its wintertime utility subsidies in March, the last of the three-month period (bills are paid from February to April). Many firms also tend to their retail prices at the April 1 start of the fiscal year, more so this year amid high wage hikes, while processed food costs remain elevated on the lingering effects of rice shortages.
The core reading (excluding fresh food) is forecast to surge to a 23-month high of a 3.2% rise on year after accelerating slightly to 2.4% in March from 2.2% in February. The year-on-year rise in the total CPI is expected to jump to a 25-month high of 3.4% after inching up to 2.9% from 2.8%. The annual rate for the core-core CPI (excluding fresh food and energy) is estimated at a 14-month high of 2.8%, also up sharply from 2.2% the previous month.
In April 2024, consumer inflation in central Tokyo’s 23 wards decelerated much faster than expected (the core CPI annual rate slowed to 1.6% from 2.4% in March) as completely free high school education took effect in the Tokyo metropolitan area, pushing down the CPI by 0.51 percentage points. The national government had been providing subsides to slash high school tuition fees but the Tokyo prefectural government added its own financial support, removing the upper limit on household income from eligibility conditions and effectively making all public and private tuition free for grade 10 to 12 students.
Despite downside risks to global growth triggered by the protectionist trade policy under the current U.S. administration, Bank of Japan policymakers are seeking to normalize the bank’s policy stance by further lifting super-low short-term interest rates at least 1% from 0.5% now. Stiff Trump tariffs and retaliation by China and other major economies are also heightening upside risks to inflation.
At its next meeting on April 30-May 1, the Bank of Japan’s nine-member board is expected to remain cautious amid high uncertainty over a global trade war, after having decided unanimously to maintain the target for overnight interest rate at 0.5% in March. Previously, the panel voted 8 to 1 to raise the policy rate by another 25 basis points to 0.5% in January in a third rate hike during the current normalization process that began in March 2024. Members are closely monitoring whether high wage increases by major firms will spread to smaller firms in fiscal 2025 that began on April 1 at a time when real wages are falling, which could hurt consumption further and generate deflationary pressures.
The core reading (excluding fresh food) is forecast to surge to a 23-month high of a 3.2% rise on year after accelerating slightly to 2.4% in March from 2.2% in February. The year-on-year rise in the total CPI is expected to jump to a 25-month high of 3.4% after inching up to 2.9% from 2.8%. The annual rate for the core-core CPI (excluding fresh food and energy) is estimated at a 14-month high of 2.8%, also up sharply from 2.2% the previous month.
In April 2024, consumer inflation in central Tokyo’s 23 wards decelerated much faster than expected (the core CPI annual rate slowed to 1.6% from 2.4% in March) as completely free high school education took effect in the Tokyo metropolitan area, pushing down the CPI by 0.51 percentage points. The national government had been providing subsides to slash high school tuition fees but the Tokyo prefectural government added its own financial support, removing the upper limit on household income from eligibility conditions and effectively making all public and private tuition free for grade 10 to 12 students.
Despite downside risks to global growth triggered by the protectionist trade policy under the current U.S. administration, Bank of Japan policymakers are seeking to normalize the bank’s policy stance by further lifting super-low short-term interest rates at least 1% from 0.5% now. Stiff Trump tariffs and retaliation by China and other major economies are also heightening upside risks to inflation.
At its next meeting on April 30-May 1, the Bank of Japan’s nine-member board is expected to remain cautious amid high uncertainty over a global trade war, after having decided unanimously to maintain the target for overnight interest rate at 0.5% in March. Previously, the panel voted 8 to 1 to raise the policy rate by another 25 basis points to 0.5% in January in a third rate hike during the current normalization process that began in March 2024. Members are closely monitoring whether high wage increases by major firms will spread to smaller firms in fiscal 2025 that began on April 1 at a time when real wages are falling, which could hurt consumption further and generate deflationary pressures.
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.
