Home Business Japan Stuck in Inflation Doldrums With Core CPI at 0.5%

Japan Stuck in Inflation Doldrums With Core CPI at 0.5%


Japan’s key measure of price changes rose ever so slightly in July, lagging well behind gains in economic growth as the central bank struggles to spur significant improvement in inflation.


  • Core consumer prices, which exclude fresh food, increased 0.5 percent in July from a year earlier (forecast +0.5%).
  • Excluding fresh food and energy, prices climbed 0.1 percent (forecast +0.1%).
  • Overall, nationwide prices rose 0.4 percent (forecast +0.4%).

Key Takeaways

Price increases are still well below the Bank of Japan’s 2 percent target, even as the economy expands. The BOJ was forced to push back the projected timing of meeting the objective for the sixth time at its July policy meeting, despite years of extraordinary monetary easing. Inflation minus fresh food and energy has been mostly flat. All this means that the BOJ is likely to continue with its stimulus while its counterparts in the U.S. and Europe look to wind back their programs.

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Economist Views

  • “The report confirmed that gains in energy prices have contributed to pushing up consumer prices after a time lag,” said Atsushi Takeda, an economist at Itochu Corp. “However, low core CPI suggests that the inflationary pressure isn’t gaining traction in a real sense.”
  • Yasutoshi Nagai, chief economist at Daiwa Securities Co. said that inflation probably wouldn’t reach 1 percent by the end of the year. “You can’t expect service prices will surge in the middle of a fiscal year because companies tend to change prices in April at the start of the fiscal year,” he said.
  • The figures confirm that a modest up tick in inflation is continuing, said Masaki Kuwahara, senior economist at Nomura Securities Co., adding that it’s not anywhere near where the Bank of Japan wants it. “The economy is good, but I think it will still be difficult for inflation to pick up much more. Meeting the BOJ’s 2019 target will be difficult,” he said.

Bloomberg Intelligence

Bloomberg Intelligence economist Yuki Masujima writes in his analysis that the data provide mildly positive signals for the reflation outlook, with the August figures for Tokyo pointing to some acceleration in price increases nationwide.

“The underlying forces for reflation have strengthened, as speeding 2Q growth pushed the output gap further into positive territory,” writes Masujima. “A pickup in core CPI toward 1 percent in September looks more likely, assuming stable oil prices and a moderate depreciation in the yen.” Inflation is likely to slow closer to the end of the year, he adds.

In the end, the data will likely encourage BOJ Governor Haruhiko Kuroda to keep monetary policy unchanged.


  • Core inflation in Tokyo in August rose 0.4 percent (forecast +0.3%).
  • Tokyo’s inflation minus fresh food and energy was flat (forecast -0.1%).
  • Overall prices in Japan’s capital rose 0.5 percent (forecast +0.3%).
  • Note: national figures are for July while data for Tokyo is for August, providing an early indication of the trend for all of Japan.

— With assistance by Yoshiaki Nohara, and Keiko Ujikane



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