Japan’s CPI core, excluding fresh food, decelerated slightly in December, moving from 2.5% yoy to 2.3% yoy, aligning with market expectations. This slowdown brings core inflation rate to its lowest since June 2022, yet it notably remains above BoJ’s 2% target for the 21st consecutive month.
Overall headline CPI also showed a slowdown, decreasing from 2.8% yoy to 2.6% yoy. Additionally, CPI core-core, which excludes both food and energy, saw a modest decline, moving from 3.8% yoy to 3.7% yoy.
A notable aspect of CPI data is the stability of services prices, which rose by 2.3% yoy, maintaining the pace from the previous month. This rate marks the fastest increase in services prices in three decades when periods affected by sales tax hikes are excluded.
A significant factor contributing to the slowdown in inflation was the substantial drop in energy prices, which decreased by -11.6% yoy. This decline was driven by reductions in electricity and city gas prices, which fell by -20.5% yoy and -20.6% yoy, respectively, largely due to government subsidies.
