May 2023 Consumer Price Index

◆Japan’s May 2023 core CPI (excluding fresh food) slowed to +3.2% y/y. New core-core CPI (excluding fresh food and energy) was at +4.3%, growth of 0.2% pt in comparison to the previous month. According to the chain index (seasonally adjusted by Laspeyres' Chain Index Method), new core-core CPI grew by +0.3% m/m. Although this constitutes a slowdown in comparison with the previous month (which recorded +0.5%), new core-core CPI maintains an extremely high pace of growth at around +3.5% annualized, and the upward trend in prices remains strong.

◆The y/y change in core CPI (excluding fresh food) is expected to exceed the Bank of Japan's price stability target level of 2% for the time being, though the growth rate will gradually slow down. With the high rate of growth in wages achieved in the 2023 spring labor negotiations, the upward trend in the price of services, which is closely linked to wages, will likely grow stronger. Companies are now becoming more aggressive in their pricing behavior, and there is a possibility that they will further accelerate their efforts to pass on the increased input costs resulting from higher wages to selling prices.