Japan Inflation


Core inflation slows in May

In May, the core consumer price index, which excludes volatile fresh food prices, rose 0.1% over the previous month. The reading followed the 0.3% increase recorded in April and marks the fourth consecutive monthly rise. Core prices were mostly affected by higher prices for fuel, light and water charges as well as for culture and recreation.

As a result of the monthly reading, core consumer prices remained flat compared to the same month last year, which was up from the 0.4% drop seen in April. That said, the print matched the result foreseen by market analysts. Meanwhile, in May, overall consumer prices fell 0.3% over the same month last year, which came in above the 0.7% decline seen in April and marks the highest reading seen since October 2012.

The core consumer price index for Tokyo, which is available one month before the national figures and thus is a leading indicator for countrywide inflation, rose 0.2% in June over the same month last year, which was up from the 0.1% rise observed in May and represents the strongest reading since March 2009. Moreover, the print was in line market expectations.

The Bank of Japan expects consumer prices to rise between 0.4% and 0.8% this fiscal year ending March 2014. In the following fiscal year, the BoJ sees inflation accelerating to between 2.7% and 3.6%. FocusEconomics Consensus Forecast panellists expect consumer prices to remain flat in 2013, which is down 0.1 percentage points from last month's estimate. In 2014, the panel sees inflation at 1.8%.

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Japan Inflation Chart

Japan Inflation May 2013

Note: Year-on-year and month-on-month var. of consumer price index in %.
Source: Statistics Bureau (SB) and FocusEconomics calculations.

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