May 2024 Consumer Price Index

◆Japan’s May 2024 core CPI (excluding fresh food) recorded +2.5% y/y. New core-core CPI (excluding fresh food and energy) was at +2.1%. The slowdown in the y/y growth for New core-core CPI rate continues.

◆Looking at the y/y change in core CPI in terms of goods and services in May 2024, the growth rate for energy prices rose significantly. On the other hand, durables, semi-durables, non-durables (excluding fresh food and energy), and services all experienced declines in y/y growth rate compared to the previous month.

◆As for the future of Japan’s new core-core CPI, growth of +2.2% y/y is expected in both FY2024 and FY2025. The sharp increase in import prices has already run its course, and the increase in intermediate input costs, which had been a major cause of rising prices, is gradually slowing. On the other hand, major wage hikes in this year’s labor negotiations will likely bring a strengthening around the middle of FY2024 of the tendency for companies to implement price pass-through in response to increased labor costs, and this is expected to lead to an increase in underlying inflation. We expect the virtuous cycle between wages and prices to become the norm in FY2025, with new core-core CPI maintaining stable growth of around +2%.