December 2023 Consumer Price Index

◆Japan’s December 2023 core CPI (excluding fresh food) recorded +2.3% y/y. New core-core CPI (excluding fresh food and energy) was at +3.7%. Growth in prices on a y/y basis is gradually slowing down. For CY2023, core CPI (excluding fresh food) rose +3.1%, a further acceleration from the core CPI growth rate in 2022 (+2.3%), and the highest growth rate since 1982.

◆Looking at the y/y change in core CPI in terms of goods and services in December 2023, durable consumer goods and semi-durables increased in the positive range. On the other hand, non-durables (excluding fresh food and energy) saw the positive range of growth shrink, while energy declined further into negative territory. The growth range in the price of services marked time in comparison to the previous month.

◆As for the future of Japan’s core CPI, growth of +2.8% y/y is expected in FY2023, with the same rate of growth (+2.8%) also seen in FY2024. As for new core-core CPI, +3.9% is seen in FY2023 and +1.9% in FY2024. With further progress in price pass-through, and a slightly higher wage increase compared to the previous year expected in spring wage negotiations in 2024, the cyclical growth mechanism of wages and prices is expected to function reliably. We expect the Bank of Japan to achieve its 2% price stability target.