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JAPAN DATA: CPI Y/Y Momentum Accelerates, But Services Inflation Eases

JAPAN DATA
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Japan National wide CPI for Jan was close to expectations. Headline rose at 4.0%y/y, as per market forecast, prior was 3.6%. The core, ex fresh food measure was 3.2%y/y, slightly above consensus of 3.1% (while prior was 3.0%). The core ex fresh food, energy, measure was 2.5%y/y, in line with market forecasts (prior was 2.4%). 

  • The chart below plots these three inflation measures, which at face value should continue to underpin BoJ confidence in achieving its 2% inflation target sustainably.
  • In m/m terms, headline CPI rose 0.5%, ex fresh food 0.4% and ex fresh food and energy 0.3%, which were close to Dec outcomes from last year. Goods prices rose 1.0%, services were flat. In non-seasonally adjusted terms, the ex all food and energy measure fell -0.1%m/m. The measure edged down to 1.5%y/y, from 1.6% prior.
  • By sub sector, food inflation remained strong. Up 1.8% m/m and 7.1% for fresh food. Whilst this segment can be volatile, BoJ Governor Ueda has noted the risk such price trends impact broader consumer inflation expectations.
  • Other positives were household goods, up 0.4%m/m, and transport 1.0%. Drags came from entertainment, -1.1%m/m and clothing, footwear, off -1.7%m/m. In y/y terms, food, particularly fresh food and utilities were still very strong in y/y terms.  
  • Services prices rose 1.4% y/y, from 1.6% in Dec.
  • Overall, some of the detail is arguably not as hawkish as the headline, core results suggest. This may see the market not add any further to BoJ tightening expectations/pricing, although equally we may not retrace much either. Note next Friday we get Tokyo Feb CPI. 

Fig 1: Japan Nationwide CPI Y/Y Trends 

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Japan National wide CPI for Jan was close to expectations. Headline rose at 4.0%y/y, as per market forecast, prior was 3.6%. The core, ex fresh food measure was 3.2%y/y, slightly above consensus of 3.1% (while prior was 3.0%). The core ex fresh food, energy, measure was 2.5%y/y, in line with market forecasts (prior was 2.4%). 

  • The chart below plots these three inflation measures, which at face value should continue to underpin BoJ confidence in achieving its 2% inflation target sustainably.
  • In m/m terms, headline CPI rose 0.5%, ex fresh food 0.4% and ex fresh food and energy 0.3%, which were close to Dec outcomes from last year. Goods prices rose 1.0%, services were flat. In non-seasonally adjusted terms, the ex all food and energy measure fell -0.1%m/m. The measure edged down to 1.5%y/y, from 1.6% prior.
  • By sub sector, food inflation remained strong. Up 1.8% m/m and 7.1% for fresh food. Whilst this segment can be volatile, BoJ Governor Ueda has noted the risk such price trends impact broader consumer inflation expectations.
  • Other positives were household goods, up 0.4%m/m, and transport 1.0%. Drags came from entertainment, -1.1%m/m and clothing, footwear, off -1.7%m/m. In y/y terms, food, particularly fresh food and utilities were still very strong in y/y terms.  
  • Services prices rose 1.4% y/y, from 1.6% in Dec.
  • Overall, some of the detail is arguably not as hawkish as the headline, core results suggest. This may see the market not add any further to BoJ tightening expectations/pricing, although equally we may not retrace much either. Note next Friday we get Tokyo Feb CPI. 

Fig 1: Japan Nationwide CPI Y/Y Trends 

Keep reading...Show less