Econintersect: For the first time in 30 months Japan has reported a rise in core CPI (consumer price index) in July. The rise just barely made it over the threshold – it was 0.1% year-over-year. And it is hardly a rise at all when paired with a larger drop in June of 0.3%. The two months together had a decline as deflation continues unabated over longer periods of measurement.The consensus expectation from economists had been for a decline in July of 0.2%. The increase in July came as a surprise since it was the first month of a new data base change which was expected to produce a lower than usual number.
Reuters said that the rise in core CPI was due to rising energy costs bleeding through into non-energy core components. Direct food and energy costs are not included in the core CPI.
Additional information from Reuters:
Japan’s core consumer prices rose slightly in the year to July, mostly on increases in energy costs, but analysts say an end to the country’s long battle with deflation remains far off due to stagnant consumption.
Prolonged deflation is adding to strains for the economy as it grapples with a strong yen and slowing global growth, just as it tries to emerge from a slump caused by the devastating earthquake in March. The Bank of Japan has pledged to keep interest rates virtually at zero until consumer inflation of 1 percent is foreseen.
Hat tips to Warren Mosler and Roger Erickson