January 20, 2023
Summary
◆Japan’s December 2022 core CPI (excluding fresh foods) was at +4.0% y/y, reaching the 4% level for the first time since December 1981. Looking at the breakdown, the growth rate of non-durable consumer goods is increasing due to the impact of food price hikes in goods, while in services, price hikes are spreading in items such as food services.
◆Japan’s core CPI growth rate is expected to continue to reflect the strong influence of the government’s Fuel Oil Price Fluctuation Mitigation Program. On a quarterly basis, the growth rate peaked in the Oct-Dec period of 2022, and is expected to decline sharply in the Jan-Mar through Jul-Sep periods of 2023 due to the effects of the program. The growth rate will accelerate again from the Oct-Dec period onward when the effects of the measures have worn off. The underlying tone of prices is expected to continue to rise moderately against the backdrop of an improvement in the supply-demand gap. However, if a high level of wage hikes is achieved in the spring labor negotiations, this will likely become a factor that pushes prices up.
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