Japan Consumer Price Index

In December 2016, the year on year inflation in the Japanese CPI excluding fresh food was -0.2%, improving from -0.4% in November.

Published monthly by the Ministry of Internal Affairs and Communication. Updated to the month of December2016/January2017 (published on January 27th, 2017).

Recent data trend:

The year on year inflation in Japan seems to be stabilizing around zero. The year on year change (YoY) in the CPI excluding fresh food was -0.2% YoY in December, improving from -0.4% YoY in November. On the other hand, the CPI excluding food and energy moved in the opposite direction, slowing down to 0.0% YoY in December, down from 0.1% YoY in November.  

Japan seems to be returning to a dead-stable price environment where prices are neither falling nor increasing. While one could argue that such state of prices might be the "ultimate" price stability a central bank should aim for, the fact remains that the BoJ has failed in delivering the 2% inflation rate it officially pursued actively in the last 3 years. The labor market remains tight and it should exert a slight upward pressure on wages and eventually on prices, but the pressure seems to be quite small. While the zero inflation may seem harmless for now, it means that when the economy is shocked by a downside risks, either external or domestic, deflation will return to Japan. With the policy rate already at -0.1% and the BoJ already implementing an unprecedented asset purchase program, the BoJ will have nothing to fight against downside risks. In our view, the vulnerability of the Japanese economy against downside shocks is a grave concern.

Brief overview of “Consumer Price Index”

Consumer Price Index (CPI) measures the weighted average price level of goods and services consumers pay. Its weights are determined by the spending pattern of household in a standard year, currently set at 2015. The Bank of Japan targets its core measure, CPI excluding fresh food. The US-styled core measure, CPI excluding food and energy, is also published in the official statistics release. The government currently does not officially publish trimmed CPI measures. Monthly CPI reports are published toward the end of the following month. The preliminary CPI report for Tokyo area is published one month in advance and it is often regarded as a leading indicator for the national CPI.

Since late 1990s, CPI in Japan has been on a very mild declining trend. Between 1998 and 2012, CPI fell by 3.9% or by 0.3% per year on average. Excluding food and energy, CPI declined by 6.4%, or by 0.6% per year on average in the same period. Japan had unusually lower CPI inflation than its global peers even prior to 1998. Between 1980 to 2000, average yearly inflation in Japan was 1.4%, sizably lower than the average of 3.6% in G7 countries.

For more information, visit the official government page

National CPI by item

Source: MIAC, JMA.

Source: MIAC, JMA.

CPI and Sub-Components

Source: MIAC, JMA.

The Next Release Date:  March 3rd, 2017.