Japan’s Core CPI Holds Steady in August, First Time in 13 Months - Forex News by FX Leaders
Japan's Core CPI Holds Steady in August, First Time in 13 Months

Japan’s Core CPI Holds Steady in August, First Time in 13 Months

Posted Friday, September 24, 2021 by
Aiswarya Gopan • 1 min read

Core consumer prices across Japan held steady instead of declining for the first time in over a year during the month of August, offering some hope to the world’s third largest economy which was facing deflationary risks amid a fragile recovery from the pandemic inflicted damage. The core CPI, which includes volatile food and energy prices, came in at 0 YoY after posting a 0.2% YoY decline in the previous month.

This was the first time since July 2020 that the core CPI did not fall into negative territory, a major worry in an economy that has been plagued with weak levels of domestic consumption since the onset of the pandemic. This has forced businesses from not passing on rising costs due to supply chain disruptions on to consumers and weighed heavily on the economic recovery lately.

Meanwhile, the core core CPI, which excludes volatile food and energy costs, posted a 0.5% YoY decline in August. This could be on account of a severe decline in mobile phone fees during the period, which posted a record 44.8% drop.

The BOJ governor, Haruhiko Kuroda, has expressed optimism that excluding factors such as a week base year reading and the sharp drop in mobile phone charges, consumer prices have been showing a gradual increase over the past few months. However, the rise remains well below the central bank’s inflation target set at 2%.

Despite the ultra-loose monetary policy in place even before the COVID-19 pandemic, Japan has been struggling to bring up its inflation levels. The weak consumption through the pandemic has worsened the situation, making it unlikely that the BOJ would be overturning its dovish approach anytime soon, even after the pandemic in contained.

 

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