August 2024 Consumer Price Index

◆Japan’s August 2024 core CPI (excluding fresh food) recorded +2.8% y/y. New core-core CPI (excluding fresh food and energy) was at +2.0%. Both statistics recorded an increase in y/y growth rate in comparison to the previous month.

◆Looking at the y/y change in core CPI in terms of goods and services in August 2024, the growth rate for durables and non-durables (excluding fresh food and energy) increased in comparison to the previous month. On the other hand, the growth rate for semi-durables declined in comparison to the previous month. The growth rate for energy and services marked time in comparison with the previous month.

◆As for the future of Japan’s new core-core CPI, growth of +2.0% y/y is expected in both FY2024 and FY2025. With the major correction of the yen rate in the direction of yen appreciation, the pace of an increase in intermediate input costs is expected to be slower particularly since the mid-point of FY2024. On the other hand, it is expected that the momentum for companies to pass on increases in labor costs to selling prices, in response to significant wage hikes during the spring labor negotiations, will become more expanding than in FY2023. There will likely be an increase in underlying inflation rate from the second half of FY2024. 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%.