November 2021 Consumer Price Index

◆Japan’s November 2021 core CPI (excluding fresh foods) was at +0.5% y/y, exceeding market consensus at +0.4%, and achieving its highest growth rate since March 2020. The bull market in commodities is bringing even more upward pressure on non-durable consumer goods. Energy is the main factor underpinning recent core CPI growth, and it can be said that ignoring this factor, the general trend in prices is marking time.

◆Looking at year-to-year performance by component in November, non-durable consumer goods, especially energy related components and foods (excluding fresh foods) pushed up overall performance. On the other hand, the contribution rate of services, which has been the major factor bringing downward pressure recently, remained pretty much unchanged in comparison with the previous month. The core CPI growth rate in y/y terms rose by +0.4%pt from +0.1% in October.

◆As for the future of y/y change in Japan’s core CPI, positive and negative factors are expected to continue competing, with moderate growth continuing overall. The macro supply-demand balance, which had continued its gradual deterioration until the Jul-Sep period of 2021, is expected to begin to improve due to the normalization of economic activities and other factors under the assumption that the stable infection situation in Japan will continue, boosting the price trend in a delayed reaction. However, we recommend caution regarding mutant variants (the omicron variant etc.) of COVID-19, which could significantly worsen the economy and prices.