Econintersect: The Japanese government Statistics Bureau said today (26 July 2013) that the year-over-year inflation rate for July registered +0.4%. However, the number was dominated by fuel, light and water charges which were 9.0% higher. Transportation and communication, as well as miscellaneous, were the other categories +1% or higher. Both reported increases of 1.2%. The core inflation rate (should be called the deflation rate) was still negative (-0.4% y-o-y). In June the core inflation rate was -0.2% and in May -0.4%.
The reason for the “or Not” in the headline can be seen in the following graph from Trading Economics, updated with the new data point:
Japan has had persistent consumer price deflation for the past 14 years with the exception a few months in 2008. The volatility in CPI has been much increased over the past three years but deflation has still remained entrenched. There is no indication from this graph that inflation is gaining a foothold. The most that can be said is that deflation has moderated from the levels seen in 2010 and 2011.
The observations above have not stopped some analysts from making statements about increasing inflation. Tomo Kinoshita, chief economist at Nomura Holdings Inc. in Tokyo was quoted by Bloomberg:
“Japan’s economy is on the right track to pull out of deflation. The relatively large increase in prices should have a knock-on effect of enhancing consumer and business inflation expectations.”
The following table is from the Statistics Bureau report:
- Japan June 2013, Ku-area of Tokyo July 2013 (preliminary) (Statistics Bureau Minister of Internal Affairs and Communications, 26 July 2013)
- Japan Prices Rise Most Since ’08 in Boost for Abe: Economy (Toru Fujioka and Andy Sharp, Bloomberg, 25 July 2013)
- Japan Core Inflation Rate (Trading Economics)