August national core CPI growth slowed for the first time in 4 months from the same month a year earlier, remaining below expectations. While electricity price declines widened due to government support for electricity and gas bills, the impact on the BOJ's rate-hike path is expected to be limited.
According to the Ministry of Internal Affairs and Communications, core CPI rose 1.7%, slowing from a 1.8% increase in the previous month. The market had expected a 1.8% increase, and the index has remained below 2% for 7 consecutive months. Energy fell to -0.7% month on month, turning negative, while food excluding fresh food rose 2.7%, dropping below 3%.
The government’s electricity and gas bill support was reflected in the August figures, and electricity price declines widened as a result. Gasoline, whose price had risen a year earlier, also recorded a wider decline. The headline index rose 1.9%, unchanged from the previous month, remaining below the BOJ’s 2% target for 8 consecutive months.
Reports suggested that the BOJ is highly likely to decide to raise its policy rate at its monetary policy meeting on the 18th. While some expect the timing of core CPI exceeding 2% to become clearer, the current movement is viewed as within expectations.
Services prices rose 1.2% and are more likely to reflect wage trends. With spring wage negotiations maintaining a high level of wage increases, attention is focused on the pass-through of wage growth. Economists view the timing of a BOJ rate hike as a factor in the decision to be made at this month’s meeting.