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CPI Close To Expectations, Core-Core Sub 2%Y/Y But Some Resilient Details

JAPAN DATA
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Japan national July CPI was close to expectations. Headline rose 2.8%, against a 2.7% forecast. (June's print was 2.8%). Ex fresh food was 2.7% in line with market expectations, 2.6%y/y was the June outcome. Core, ex fresh food and energy, printed in line with market forecasts at 1.9%y/y but this was a step down from the June 2.2% pace.

  • In m/m seasonally adjusted terms momentum was still reasonable. Headline CPI rose 0.2%, slightly down from June, while core ex fresh food was 0.3%, ex fresh food and energy 0.1%. Good prices rose 0.5%, while services were up 0.1%, although this is at risk of being revised away if history is a guide.
  • The ex all food and energy measure rose 0.2% m/m terms (not seasonally adjusted).
  • In terms of the sub-categories, fresh food (-1.8%m/m) and -1.2%m/m for clothing were the main drags. Entertainment rebound +1.0%, after falling in the previous two months. Other segments didn't display significant shifts relative to June outcomes.
  • The data is unlikely to shift BoJ thinking materially. The watch point will be on core ex fresh food, energy y/y momentum being sub 2%, see the chart below (the white line).
  • Base effects may bias y/y momentum lower through the remainder of Q3/early Q4. Still, the other inflation metrics remain comfortably above the BoJ's 2% target.

Fig 1: Japan National CPI Trends

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Japan national July CPI was close to expectations. Headline rose 2.8%, against a 2.7% forecast. (June's print was 2.8%). Ex fresh food was 2.7% in line with market expectations, 2.6%y/y was the June outcome. Core, ex fresh food and energy, printed in line with market forecasts at 1.9%y/y but this was a step down from the June 2.2% pace.

  • In m/m seasonally adjusted terms momentum was still reasonable. Headline CPI rose 0.2%, slightly down from June, while core ex fresh food was 0.3%, ex fresh food and energy 0.1%. Good prices rose 0.5%, while services were up 0.1%, although this is at risk of being revised away if history is a guide.
  • The ex all food and energy measure rose 0.2% m/m terms (not seasonally adjusted).
  • In terms of the sub-categories, fresh food (-1.8%m/m) and -1.2%m/m for clothing were the main drags. Entertainment rebound +1.0%, after falling in the previous two months. Other segments didn't display significant shifts relative to June outcomes.
  • The data is unlikely to shift BoJ thinking materially. The watch point will be on core ex fresh food, energy y/y momentum being sub 2%, see the chart below (the white line).
  • Base effects may bias y/y momentum lower through the remainder of Q3/early Q4. Still, the other inflation metrics remain comfortably above the BoJ's 2% target.

Fig 1: Japan National CPI Trends

Keep reading...Show less