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Japan Inflation February 2024

Japan: Inflation comes in at highest level since November 2023 in February

Inflation increased to 2.8% in February, following January’s 2.2%. February’s figure marked the highest inflation rate since November 2023. However, much of the jump was due to base effects; a subsidy for utility costs was introduced in February 2023, and as a result entered into the year-on-year base of comparison in February 2024.

Annual average inflation fell to 3.0% in February (January: 3.1%). Meanwhile, core inflation rose to 2.8% in February, from January’s 2.1%, matching market expectations.

Finally, consumer prices fell 0.03% in February over the previous month, swinging from January’s 0.12% increase.

Our panelists expect inflation to gradually decline ahead, falling below the Bank of Japan’s 2.0% target in Q4 2024. Much of the recent increase in inflation has been due to the recent rise in commodity prices. As commodity prices are set to decline ahead from current levels, inflation in Japan is set to do so in turn as well. A key factor to watch will be the effect on inflation of this year’s annual wage negotiations, which led to the highest salary hike since the early 1990s among unions and large Japanese firms.

Analysts at EIU said:

“Wage growth is strengthening and average nominal wage growth exceeded the consumer price index in January, pushing real wage into positive territory again for the first time since June 2023. The strong rise in nominal wage negotiated in March will reinforce this trend.”

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