MNI BRIEF: Japan Jan Tokyo CPI Rises 4.3%; Highest Since 1981

The year-on-year rise in Tokyo core inflation rate accelerated to 4.3% in January from December’s revised 3.9%, indicating that the nationwide core CPI will likely rise above 4% in January compared to 4% in December, data from the Ministry of Internal Affairs and Communications showed on Friday.

January’s 4.3% y/y increase is the highest since May 1981 when it rose 4.3% and marked the 17th straight rise. The Tokyo core CPI remained above the Bank of Japan's 2% target for an eighth straight month in January, a sign that rising raw material costs were steadily pushing up a broad range of prices for daily necessities. (See MNI BRIEF: Japan's Dec Core CPI Rises 4%; Highest in 41 Years)

The BOJ's January Outlook Report kept the core CPI forecast for the 2023 fiscal year steady at 1.6%, but lifted the 2024 forecast to 1.8% from 1.6%.

The Tokyo CPI index was boosted by high prices for energy (+26% y/y vs. +26% y/y in December) and for foods excluding perishable foods (+7.4% vs. +7.5%).

The core-core CPI (excluding fresh food and energy) - a key indicator of the underlying trend of inflation - rose 3% y/y in January, accelerating from 2.7% in December.

Tokyo saw processed food prices, which BOJ officials are focused on and that are sensitive to economic activity, rise 7.6% in January after rising 7.8% the prior month. Prices for eating and drinking services, which BOJ officials also closely watch, rose 7.4% y/y in January, up from 7.1% in December.