June 2021 Consumer Price Index

◆Japan’s June 2021 core CPI (excluding fresh foods) grew by +0.2% y/y in keeping with market consensus, and maintaining positive y/y performance for the second consecutive month. Meanwhile, new core-core CPI (excluding fresh foods and energy), which indicates the price trend, suffered a year-to-year decline for the third consecutive month at -0.2%. However, prices continue to maintain underlying strength if we exclude the influence of special factors.

◆Looking at year-to-year performance by component in June, rising energy prices were a major factor in pushing up overall performance. On the other hand, services continued the previous month’s declining trend. As for energy prices, gas & electricity bills, which lag in reflecting changes in the price of crude oil, reduced the extent of their decline. Meanwhile, in services, mobile phone communication fees (mobile phone charges) continued the previous month’s trend, declining significantly in comparison to the previous year at -27.9%.

◆As for the environment surrounding Japan’s core CPI, positive and negative factors are expected to continue competing for the most influence. Positive factors include growth in the price of crude oil and the price of imported goods, with residual influence also expected from last year’s Go To Travel Campaign in August and beyond. On the other hand, the cut in mobile phone communication fees is expected to continue holding down the year-to-year growth rate. Core CPI in July, to be announced on August 20, 2021, is to be revised according to 2020 standards. In association with this change, Japan’s core CPI is expected to be on the low side with a maximum of -0.3%pt y/y.