December 2024 Consumer Price Index

◆Japan’s December 2024 core CPI (excluding fresh food) recorded +3.0% y/y, an expansion in the y/y growth rate for the second consecutive month. An increase in the price of energy due to the government’s termination of electricity & gas subsidies, which were part of its “Emergency Assistance for Overcoming Severe Summer Heat,” pushed prices up. New core-core CPI (excluding fresh food and energy) was at +2.4%, marking time in comparison to the previous month.

◆Looking at the y/y change in core CPI in terms of goods and services in December 2024, the y/y growth rates for energy and non-durables (excluding fresh food and energy), as well as services expanded in comparison to the previous month. On the other hand, the y/y growth rates for durables and semi-durables shrank.

◆As for the future of Japan’s new core-core CPI, growth of around +2% y/y is expected in both FY2024 and FY2025. The main cause of rising prices has already shifted from an increase in intermediate input costs to an increase in labor costs. The structural issue of an intensifying labor shortage is the factor behind this situation, and companies are expected to continue to raise wages. This will also lead to a continuation of the trend of passing on the resulting increase in labor costs to sales prices. We expect the cyclical increase in wages and prices to become the norm in FY2025.