June 2024 Consumer Price Index

◆Japan’s June 2024 core CPI (excluding fresh food) recorded +2.6% y/y. New core-core CPI (excluding fresh food and energy) was at +2.2%. Both CPI categories saw an acceleration of growth rate from the previous month.

◆Looking at the y/y change in core CPI in terms of goods and services in June 2024, the growth rate for durables, energy, and services increased. This includes the effects of the reduction of government subsidies for high energy prices and the revision of medical fees. On the other hand, growth rates for semi-durable and non-durable goods (excluding fresh food and energy) declined.

◆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%.