Japanese inflation hits a multi-year high on the back of higher energy prices


Japanese inflationary continue to build.

According to data released by Japan’s statistics bureau, headline consumer price inflation (CPI) rose by 0.7% in the year to August, leaving it at the highest level seen since March 2015.

Core CPI, that which excludes fresh food prices and of more significance when it comes to the outlook for Japanese monetary policy, also picked up, rising 0.7% over the same period having risen 0.5% in July.

While in line with expectations, that too was the fastest annual increase since March 2015.

However, so-called core-core CPI — more akin to underlying inflation readings used by other major central banks given it also eliminates movements in energy prices — was unchanged over the year.

This took some of the gloss of the result, hinting that much of the increase in the core CPI rate was due to higher energy prices.

Given the Bank of Japan’s (BoJ) annual inflation target is currently 2%, it underlines why the bank will not join other major central bank in normalising monetary policy settings anytime soon.

Hinting that inflationary pressures are unlikely to build significantly in the near-term, Tokyo’s core CPI rate — released one month ahead of the national figure — rose by 0.5% over the year, up slightly from 0.4% in August.

Outside of the inflation figures, other data released on Friday came in mixed.

The national unemployment rate held steady at 2.8% in August — unchanged from July and in line with expectations — while the jobs-to-applicants ratio was also unchanged at 1.52.

The latter measures the number of jobs available to those seeking work, meaning that there are currently more jobs than applicants at present.

Elsewhere household spending grew by 0.6% in the year to August, an improvement on the 0.2% decline reported in July but below economist forecasts for a larger increase of 1.0%.

Industrial output bucked the trend, rising 2.1% in August after declining 0.8% in July. That marginally topped expectations for a smaller increase of 1.9%.

Looking ahead, factories expect output to fall 1.9% in September before recovering 3.5% in October.

Mirroring the mixed economic report card, Japanese financial markets are largely unchanged.

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