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Japan Inflation February 2022

Japan: Core inflation nears two-year high in February

Core consumer prices—which exclude fresh food—increased 0.40% in February over the previous month, rising from the flat result logged in January. February’s uptick marked the highest reading since January 2021.

Core consumer price inflation came in at 0.6% in annual terms in February, which was up from January’s 0.3% print. February’s reading represented the highest inflation rate since March 2020. As such, the trend pointed up slightly, with the annual average variation of core consumer prices coming in at 0.6% in February (January: 0.2%). Lastly, consumer price inflation rose to 0.9% in February, from the previous month’s 0.5%.

Regarding the outlook for inflation, Alvin Liew, senior economist at United Overseas Bank, commented:

“Factoring the geopolitical-driven commodity price surge and another temporary raw material supply chain disruption, both the CPI headline and core inflation will spike above 2% in the coming months of 2022, above the BoJ’s 2% inflation target, in our view. But it will be temporary and not for the desired reason as wage driven inflation remains largely elusive. The drag of mobile charge fees which had weighed heavily on overall prices in the past year, will fade from Q2 onwards, adding positive base effects to inflation. As a result, we have upgraded headline CPI inflation to average 2.5% (from previous forecast of 1.7%) while core inflation will average 2.2% in 2022.”

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