Japan Inflation

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Japan: Core inflation surges to 32-year high on tax increase in May

June 27, 2014

In May, the core consumer price index, which excludes volatile fresh food prices, rose 0.4% over the previous month, which was well below the 2.2% increase recorded in April. The hefty rise observed in April reflected that businesses passed the burden of the 1 April sales tax hike on to consumers. May’s print was mainly underpinned by a large jump in prices for fuel, light and water charges.

Annual core inflation rose from 3.2% in April to 3.4% in May, which represented the highest reading since 1982. That said, May’s reading was in line with market expectations. Overall inflation rose from 3.4% in April to 3.7% in May, which also marked a multi-year high.

Core inflation for Tokyo—available one month in advance of the national figures and thus a leading indicator for countrywide inflation—was stable at the previous month’s 2.8% in June, which was in line with market expectations.

The Bank of Japan (BoJ) expects that core inflation will be between 3.0% and 3.5% in the fiscal year ending March 2015. In the following fiscal year, the BoJ sees inflation falling to between 1.9% and 2.8%. FocusEconomics Consensus Forecast panelists expect inflation of 2.5% in the calendar year 2014, which is unchanged from last month’s estimate. In 2015, the panel sees inflation at 1.6%.


Author: Ricard Torné, Lead Economist

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Japan Inflation Chart


Japan Inflation May 2014 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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