JAPAN DATA: Headline CPI Above Forecasts, But Food & Utilities Main Drivers
Jan-23 23:49
Japan Dec national inflation was a touch above expectations for the headline, which rose 3.6% y/y, versus 3.4% forecast (prior was 2.9%). The core ex fresh food measure was 3.0%y/y, in line with forecasts (prior 2.7%). The ex fresh food, energy measure was 2.4%y/y, also in line with forecasts and the prior outcome. A broader measure of core inflation, which strips out all food and energy was 1.6% t/t in Dec, down slightly from Nov's 1.7% pace.
- For headline inflation, base effects will help keep y/y momentum elevated in the near term, likewise for the core ex fresh food measure. The measure which also excludes energy is likely to be benign though given early 2024 y/y trends.
- In terms of the detail, in m/m terms we had goods inflation up 1.1% versus 0.2% prior. Services ticked up to 0.1% in seasonally adjusted terms, but these gains are usually revised back to flat in subsequent readings.
- Food inflation was +1.0%m/m, driven by a 5.7% rise in fresh food. Utilities also posted a 4.2% m/m rise. This should start to wane though with the government re-introducing energy subsidies.
- Household good, clothing and medical care all recorded m/m falls. In y/y terms, outside of strong food and utility rises, we saw fairly steady y/y trends in most other categories.
- The chart below plots the 3 month inflation metrics. The above detail suggests less concern around the headline trends from a core/underlying inflation standpoint. Still, it does lend support to an expected inflation forecast upgrade from the BoJ later, which is expected to accompany a 25bps rate hike.
Fig 1: Japan National CPI Y/Y Trends
Source: MNI - Market News/Bloomberg
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