Japan: Inflation rate continues to rise – Nomura


Analysts at Nomura note that the February all-Japan core CPI (ex-fresh food) was +1.0% y-y, which was 0.1ppt stronger than the January reading and in line with the consensus forecast (Bloomberg survey median).

Key Quotes

“The all-Japan core CPI (excluding food and energy but including alcoholic beverages) was +0.3% y-y, up from +0.2% in January.”

“A breakdown shows that inflation was boosted by certain items in particular, namely higher prices for accommodations, overseas package tours, and mobile phones. That said, the rise in the all-Japan inflation rate in February looks as though it was driven largely by temporary price fluctuations, as (1) monthly overseas package tour and accommodation prices tend to be highly volatile, and (2) the y-y rise in mobile phone prices looks to have been skewed by the drop in prices a year earlier.”

We forecast a gradual rise in the inflation rate heading into summer

  • The impact from rising energy prices, which has been the main driver of inflation since 2017, looks to have already peaked, and we expect this factor to exert less inflationary pressure going forward.
  • We expect the core inflation rate to rise to around 1.1% by the summer of 2018 owing in part to rising costs on such factors as higher wages stemming from intensifying labor shortages.”

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