This article reviews the status of core indicators estimated by the Bank of Japan based on October's Tokyo-area CPI, and the outlook for determining whether underlying inflation has reached 2%. Attention is focused on year-on-year movements in each indicator and the future direction of prices.
This article calculates indicators based on October's Tokyo-area CPI, following the core indicators and other measures estimated by the Bank of Japan using nationwide CPI, and shows movements in the series excluding special factors, trimmed mean, weighted median, mode and low-volatility-item CPI. Year-on-year growth is shown for each indicator, with the overall Tokyo-area trend described as firm.
The series excluding fresh food and special factors rose from 3.0% in September to 3.2% in October, while the series excluding fresh food, energy and special factors fell from 3.0% to 2.8%. The trimmed mean rose from 2.3% in September to 2.4% in October, the weighted median fell from 2.0% to 1.9%, and the mode rose from 1.6% to 1.8%. Nationwide low-volatility-item CPI rose from 1.3% in August to 1.4% in September, while the Tokyo-area figure remained at 2.0% from September to October.
Overall, the article confirms the firmness of prices. In light of reports that the Bank of Japan will determine at today's meeting whether underlying inflation has reached 2%, the economy may move from a phase of aiming for 2% to one of keeping inflation around 2%. The Bank of Japan is expected to place greater emphasis on measures of underlying inflation, and attention will focus on whether actual price increases feed through to medium- and long-term inflation expectations. Price growth may accelerate as higher crude oil costs are passed through, with the impact on inflation expectations in particular becoming a key focus.