Japan: Tokyo CPI data supports BoJ hawkish stance – Societe Generale

Societe Generale’s Reo Sakida and Jin Kenzaki note that August Tokyo CPI was broadly in line with expectations, with renewed energy subsidies weighing on inflation and likely to drag on CPI through October. Non-fresh food inflation slowed despite upstream cost pressures, while services inflation picked up mainly on rents and medical charges, with limited implications so far for nationwide CPI but still supporting the BoJ’s hawkish path.

Tokyo CPI dynamics and BoJ outlook

"The resumption of electricity and gas subsidies weighed on inflation and should continue to drag on CPI through the October data."

"We had expected food inflation to enter a re-acceleration phase from August, but higher upstream costs appear to need more time to feed through to consumer prices."

"Underlying price pressure remains, however."

"As BoJ Deputy Governor Himino noted yesterday, repricing activity is likely to intensify in the coming months, while the Teikoku Databank survey points to another wave of price revisions toward year-end."

"This continues to support the BoJ’s hawkish path."