March 2021 Consumer Price Index

◆Japan’s March 2021 core CPI (excluding fresh foods) declined by -0.1% y/y, while at the same time exceeding market consensus at -0.2% and narrowing the extent of its decline for the third consecutive month. Meanwhile, new core-core CPI (excluding fresh foods and energy), which indicates the price trend, recorded growth of +0.3%. Japan’s core CPI for the FY2020 period declined by -0.4% y/y. This was due to the major decline in prices brought on by the low price of crude oil, which brought down prices to the greatest extent experienced since FY2016.

◆Looking at performance by component, the major contributor in March was the increase in energy prices, as well as prices for services. Energy prices were influenced by the comeback in the price of crude oil, which brought a shift into a growth trend for gasoline prices. Meanwhile, gas & electricity bills, which lag behind gasoline in reflecting changes in the price of crude oil, reduced the extent of their decline. As for services, accommodations and other industries also contributed to growth. On the other hand, mobile phone communication fees, influenced by cuts in mobile phone usage rates, brought down overall performance. Other items, such as women’s outer wear, buoyed performance.

◆As for the future of Japan’s core CPI in y/y terms, a shift into positive growth is expected in April. Factors encouraging this trend include the macro supply-demand balance as seen in the gap in supply and demand, growth in the price of crude oil, and the increase in import prices associated with the weakening yen. Meanwhile, the recent rise in corporate prices is also expected to bring lagging influence on pushing CPI up.