Japan: Core inflation rate slows – Nomura

Analysts at Nomura note that he March 2018 all-Japan core CPI (all items less fresh food) was +0.9% y-y, a slowdown of 0.1ppt versus February and the same as the consensus forecast (Bloomberg survey median).

Key Quotes

“The March all-Japan core CPI (ex food and energy but including alcohol) came in at +0.3% y-y, flat versus the February growth figure.”

“A breakdown of core CPI growth shows mobile phones have continued to boost the core CPI since February (making a 0.10ppt greater positive contribution to the y-y rise in core CPI inflation in March than in February), but that in addition to energy-related items, growth slowed down for accommodation (-0.06ppt) and overseas package tours (-0.01ppt), items that had contributed to y-y acceleration in core CPI inflation in February, and this was the main factor behind the slowdown in growth for the overall core CPI in March. Accommodation and overseas package tours tend to be highly volatile on a monthly basis, and the slowdown in core CPI inflation in March could be read as resulting from the dropout of the February boost from these items.”

“Forecasts for April Tokyo CPI

We forecast the April Tokyo core CPI will come in at +0.8% y-y, unchanged from the March reading. We forecast CPI inflation excluding fresh food and energy (the BOJ version of core CPI) of 0.6% y-y, up 0.1ppt on March, as we believe costs rose as a result of increased labor shortages, among other factors. However, energy price inflation seems to have grown at a slower pace in April. Overall, we expect core CPI to be unchanged from the March reading.”