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Japan’s CPI, excluding fresh food, is likely to have improved a bit in August, but remained in the negative territory. According to a Societe Generale’s research note, the CPI, excluding fresh food, is expected to have come in at -0.4 percent year-on-year, the sixth straight month of negative growth. But the CPI is expected to have rebounded from -0.5 percent in July, although it is still far from the 2 percent price stability target set by the Bank of Japan.
Given that the CPI, excluding food and energy, growth is decelerating considerably, the August CPI excluding food and energy is anticipated to have come in at +0.3 percent year-on-year, the same as in July, added Societe Generale. However, it would be much weaker than the peak of 0.9 percent seen in September 2015.
BoJ Governor Kuroda in his speech in early September mentioned that apart from the fall in energy prices, other factors are also contributing to the fall in inflation expectations, such as the weakness in private consumption because of the consumption tax hike in 2014, the deceleration in the emerging markets since the summer of 2015 and uncertainties in the global financial markets.
But the factors leading inflation to slowdown have began reversing, as energy prices have recently began recovering, global economic and markets uncertainties have started stabilizing and as government’s fiscal policy has changed the focus to expansion from austerity.
The CPI, excluding fresh food, is expected to stay in the negative territory until early next year; however, it is anticipated to rebound up to about 0.5 percent year-on-year by the end of 2017, noted Societe Generale.
“We expect September Tokyo CPI ex. fresh food to be -0.4 percent yoy, unchanged from August. However, Tokyo CPI ex. food and energy will likely fall to 0.0 percent yoy from +0.1 percent yoy in August, and growth will likely stop for the first time since October 2013”, added Societe Generale.
