Japan’s headline CPI was unchanged at 1.9% y/y in August, while the seasonally adjusted index was flat on the month. CPI excluding fresh food slowed from 1.8% to 1.7% y/y, undershooting the 1.8% consensus and remaining below 2% for an eighth consecutive month. By contrast, CPI excluding fresh food and energy held at 1.9% y/y and rose 0.3% m/m, pointing to steadier underlying pressure.
Energy accounted for much of the slowdown in the standard core measure. Energy inflation fell from 0.6% to -0.7%, as electricity prices declined 2.4% and gasoline prices dropped 2.6% from a year earlier. Government measures affecting gasoline and household energy reduced headline inflation by an estimated 0.62 percentage points. Food inflation also moderated: prices excluding fresh food slowed from 3.0% to 2.7%, although snacks, prepared meals, beverages and dining-out costs continued to rise.
The release therefore showed selective disinflation rather than a broad retreat in prices. Government-supported energy relief and slower food inflation pulled the core rate lower, while the measure excluding both fresh food and energy stayed close to 2% and recorded a solid monthly increase. With recent global oil prices considerably higher than those reflected in the August data, part of the current energy drag could also prove temporary.
Data summary
| Inflation measure | Aug y/y | Jul y/y | Result |
|---|---|---|---|
| Headline CPI | 1.9% | 1.9% | Unchanged |
| CPI excluding fresh food | 1.7% | 1.8% | Below 1.8% forecast |
| CPI excluding fresh food and energy | 1.9% | 1.9% | Unchanged |
| Inflation measure | Aug m/m, seasonally adjusted |
|---|---|
| Headline CPI | 0.0% |
| CPI excluding fresh food | +0.1% |
| CPI excluding fresh food and energy | +0.3% |
| Key component | Aug y/y | Jul y/y |
|---|---|---|
| Energy | -0.7% | +0.6% |
| Electricity | -2.4% | -0.1% |
| Gasoline | -2.6% | -1.8% |
| Food excluding fresh food | +2.7% | +3.0% |
| Fresh food | +6.0% | +7.0% |
| Government measure | Estimated contribution to CPI |
|---|---|
| Overall energy measures | -0.62 percentage points |
| Gasoline measures | -0.38 percentage points |
| Electricity measures | -0.17 percentage points |
| City gas measures | -0.03 percentage points |
| Kerosene measures | -0.04 percentage points |
Key takeaways
- Japan’s standard core CPI slowed from 1.8% to 1.7%, missing the 1.8% consensus and remaining below 2% for an eighth consecutive month.
- Headline inflation held at 1.9%, while the measure excluding fresh food and energy also remained at 1.9%.
- Underlying monthly momentum was firmer than the annual readings imply: CPI excluding fresh food and energy rose a seasonally adjusted 0.3% m/m.
- Energy was the main source of disinflation. Its annual rate reversed from +0.6% to -0.7%, led by falling electricity and gasoline prices.
- Government support had a significant effect, reducing energy’s estimated contribution to overall CPI by 0.62 percentage points. The softer core rate therefore partly reflected administered relief rather than broad-based disinflation.
- Food pressure moderated but remained evident. Inflation in food excluding fresh items eased from 3.0% to 2.7%, while fresh-food inflation slowed from 7.0% to 6.0%.
- The figures suggest selective disinflation rather than a decisive retreat in underlying prices. The recent increase in global energy costs could also reverse some of August’s energy relief in coming months.
