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Japan’s core consumer price index up 2.4% in July

August 29, 2008
By Ken Worsley


With a 2.4% rise in July, Japan’s core consumer prices have now risen every month so far this year, and for ten consecutive months overall, according to data released today by the Ministry of Internal Affairs and Communications.

Because Japan includes energy prices as part of its core CPI, it’s also helpful to look at what the CPI looks like with energy stripped out. Here’s a breakdown of CPI categories for July:

  • July general nationwide consumer price index: +2.3%
  • July general nationwide consumer price index (excluding rent): +2.8%
  • July nationwide core CPI (excluding fresh food): +2.4%
  • July nationwide consumer price index (excluding fresh food and energy): +0.2%

Inflation in all four categories has accelerated beyond what was seen last month, and for the first time this decade we have seen the CPI rise for two months in a row when energy prices are stripped out. Of course, this is still only the third time in the past ten years we have seen a rise in this figure.

Here’s a breakdown of price increase by major category:

  • Fuel, light and water charges +9.3%
  • Transportation and communication +5.2%
  • Food +3.5%
  • Education +0.7%
  • Miscellaneous +0.7%
  • Clothes and footwear +0.3%
  • Housing +0.2%
  • Furniture and household utensils +0.4%
  • Medical Care -0.3%
  • Reading and recreation -0.3%

Nine out of ten categories remained on the same side of the fence, with only “furniture and household utensils” swinging from -0.4% last month to +0.4% this month. Thus, eight out of ten categories now show price inflation.

Energy and transportation costs continue to soar, while inflation in food prices actually backed off a bit in July. In June, food prices had been up 3.6%, against the 3.5% seen in July.

Most significantly, as we predicted last month, core CPI has jumped above the 2.0% level. The Bank of Japan generally believes 2.0% to be the maximum level at which inflation should be before interest rate rises must be triggered. Of course, this policy is by no means automatic, and given the current economic situation, it would seem absurd to see a hike in interest rates just after having learned that GDP fell an annualized 2.4% in the second quarter.

Filed Under Consumer Price Index, Economic Reports 

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Comments

6 Responses to “Japan’s core consumer price index up 2.4% in July”

  1. CCo on August 30th, 2008 7:02 pm

    So you’re saying that the Bank of Japan now has no choice but to raise rates?

  2. Ken Worsley on August 31st, 2008 10:51 am

    So you’re saying that the Bank of Japan now has no choice but to raise rates, right?

    That was never stated, and certainly never hinted at. Read the article again.

  3. Grayson on September 1st, 2008 7:42 pm

    So, food prices are no longer rising, in a sense. They are up against a year before, but not so high as the months before. 3% more for food versus a year ago, what is that? Almost nothing. Japan is going to get through this just fine.

  4. Ken Worsley on September 1st, 2008 10:12 pm

    Grayson, wages are up much less than that, while energy costs are up and so are transportation costs. I don’t see how you don’t think this is not an issue for average households.

    Are you on an expat package? Do you know any average Japanese?

  5. Grayson on September 1st, 2008 11:46 pm

    Maybe, maybe not. That makes no difference. We’re still watching the current economic conditions. But, the food price hike is barely a blip on the radar, which is what I’m saying.

  6. Ken Worsley on September 2nd, 2008 12:14 am

    Grayson, let me know when you can actually answer my questions.

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