Japan Inflation July 2016


Decline in core prices deepens to over five-year low in July

In July, the core consumer price index fell 0.2% compared to the previous month, which was below the flat reading in June. The print mainly reflected lower prices for fuel, light and water charges as well as for clothes and footwear.

Core prices were down 0.5% over the same month last year in July, which came in below the 0.4% drop recorded in June. The print exceeded the 0.4% decline expected by market analysts and was the lowest since March 2011. Overall consumer prices in July fell 0.4%, matching June’s decline.

Core prices for Tokyo—available one month in advance of the national figures and thus a leading indicator for countrywide inflation—fell 0.4% in August over the same month last year, mirroring July’s figure.

The Bank of Japan (BoJ) expects that core inflation will be between 0.0% and 0.8% in the fiscal year ending March 2017. In the following fiscal year, the BoJ sees inflation between 1.8% and 3.0%, or between 0.8% and 2.0% when excluding the effects of the expected consumption tax hike in April 2017. FocusEconomics Consensus Forecast panelists expect inflation of 0.1% in calendar year 2016, which is down 0.1 percentage points from last month’s estimate. In 2017, the panel sees inflation at 0.8%.

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Japan Inflation Chart

Japan Inflation July 2016 0

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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