Japan: Core inflation continues to slow – Nomura

Analysts at Nomura note that the Tokyo core CPI (all items, ex fresh food) for May rose 0.5% y-y, down 0.1ppt from the April inflation reading, and 0.1ppt below the consensus forecast (Bloomberg survey median) for a 0.6% increase.

Key Quotes

“The Tokyo area CPI excluding fresh food and energy (the BOJ’s version of the core core CPI) was up 0.2% y-y in May, 0.1ppt below the April reading.”

“A breakdown of core CPI growth shows that inflation slowed across a wide range of categories. Core CPI was pushed down by prices for overseas package tours, which tend to swing widely (contribution was -0.03ppt worse than in April), as well as by energy-related categories (-0.01ppt), and tumbling prices for durable goods (-0.05ppt).”

“While the decline in final goods / consumer goods in the corporate goods price index (CGPI) has already come to a halt as of April, yen appreciation could continue to push down CPI goods prices going forward, and we believe there is a possibility that the core CPI inflation rate could end up being less than we have forecast.”