| Consensus | Consensus Range | Actual | Previous | |
| CPI - Y/Y | 1.6% | 1.4% to 1.9% | 1.5% | 1.4% |
| Ex-Fresh Food - Y/Y | 1.8% | 1.6% to 2.0% | 1.5% | 1.7% |
| Ex-Fresh Food & Energy - Y/Y | 2.3% | 2.0% to 2.5% | 1.9% | 2.3% |
Highlights
Consumer inflation in Tokyo, a leading indicator of the national trend, edged below the Bank of Japan's 2% target across all three key measures in April as declines in energy prices and child daycare fees weighed on overall prices.
The core CPI, which excludes fresh food, rose 1.5% on the year in April, slowing from 1.7% in March and marking the lowest level since March 2022, when it stood at 0.8%. The core-core CPI, which excludes both fresh food and energy, rose 1.9% on the year, slipping below the 2% mark for the first time in 14 months from 2.3% in March.
Persistent geopolitical tensions in the Middle East kept energy prices elevated, but the impact has been relatively contained by government emergency subsidies, which cap gasoline prices at around ¥170 per liter.
Still, the total CPI accelerated for the first time in six months. The total CPI edged up 1.5% on the year in April from a four-year low of 1.4% in March. Higher commuter pass fees by JR East contributed to the increase, along with gains in food and hotel prices. The commuter pass hike is likely to have a sizable impact on transport costs and, in turn, the national CPI.
Details:
Japan Apr Tokyo core CPI (ex-fresh food) +1.5% y/y (Mar +1.7%), median forecast +1.8% (range: +1.6% to +2.0%)
Japan Apr Tokyo core CPI annual rate at +1.5%, lowest since +0.8% in Mar 2022
Japan Apr Tokyo total CPI +1.5% y/y (Mar +1.4%); median forecast +1.6% (range: +1.4% to +1.9%)
Japan Apr Tokyo core-core CPI (ex-fresh food, energy) +1.9% y/y (Mar +2.3%); median forecast +2.3% (range: +2.0% to +2.5%)
Japan Apr Tokyo CPI: energy -4.6% y/y (-0.24 point contribution), vs. -7.5% (-0.39 point) in Mar
Japan Apr Tokyo CPI: processed food +4.6% (+1.09 point) vs. +4.9% (+1.14 point) in Mar
Japan Apr Tokyo child daycare fees drop 100% (-0.49 point contribution)
Japan Apr Tokyo JR train commuter pass rise 17.3% (+0.04 point contribution)
Japan JR East train network commuter pass price hike likely to have sizable impact on national transport cost
Market Consensus Before Announcement
The Tokyo consumer price index, a leading indicator of nationwide price trends, is expected to edge higher across the two main measures in April. The closely watched core CPI is seen accelerating for the first time in six months.
The core CPI, which excludes fresh food, is projected to rise 1.8 percent in April from a near two-year low of 1.7 percent a month earlier. The underlying weakness of the yen continues to pose upside inflation risks.
Consumer inflation is seen edging up as the government is scaling back subsidies for electricity and gas from April, along with train fare hikes implemented from mid-March. Gasoline prices remain elevated amid tensions in the Middle East, but energy costs have been kept relatively contained by the government emergency subsidies, which cap gasoline prices at around ¥170 per liter. Meanwhile, food price gains appear to be slowing, with supermarket prices also trending lower.
Elsewhere, the overall CPI is expected to pick up for the first time since October last year, rising 1.6 percent on the year in April after increasing 1.4 percent in March. The core-core index, which excludes fresh food and energy, is seen holding steady at 2.3 percent.
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).
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.