Tokyo CPI flags rising price pressures

04 October 2022

Emily Nicol

Tokyo CPI flags rising underlying price pressures, with core inflation at its highest since 1991 (when excluding impact of consumption tax hikes)
Today’s Tokyo CPI inflation figures broadly aligned with expectations. In particular, this showed the headline inflation rate edging slightly lower in September, by 0.1ppt to 2.8%Y/Y. However, the decline principally reflected a softer pace of increase in food inflation, down 0.5ppt to 4.2%Y/Y, with fresh food inflation down 7½ppts to 2.9%Y/Y. Energy inflation also edged marginally lower, by 1.4ppts to a still-lofty 24.2%Y/Y, with the annual increase in electricity prices down 1.1ppts to 27.9%Y/Y and gas down 2.6ppts to 25.3%Y/Y. So with a further significant rise in inflation of household goods (up 5.3ppts to 9.5%Y/Y) and services inflation (up 0.1ppt to 0.8%Y/Y) boosted by higher hotel charges (up 3.7ppts to 6.6%Y/Y) amid a recovery in tourism, the various core inflation measures all picked up further. In particular, the BoJ’s forecast inflation measure (excluding fresh food) rose 0.2ppt to 2.8%Y/Y, the highest since mid-2014 and when excluding the impact of consumption tax hikes was the highest since 1991. The BoJ’s preferred core measure (ex fresh food and energy) rose 0.3ppt to 1.7%Y/Y, while the internationally comparable core measure (ex all food and energy) rose 0.2ppt to 0.8%Y/Y, admittedly still well below the BoJ’s 2% target.

Euro area PPI set to rise to a new series high amid soaring energy prices
Inflation will be the main focus in the euro area too, with the release of producer price figures to provide an update on inflationary pressures at the factory gate in August. Given the surge in the German PPI rate to a new series high due to the energy shock, and higher PPI rates in France (29.5%Y/Y) and Italy (50.5%Y/Y), we expect the headline euro area producer inflation rate to jump to a new record from July’s reading of 37.9%Y/Y to well above 40%Y/Y. But having seemingly peaked at the start of the summer, producer prices of intermediate goods may well continue the downwards trend and therefore we might well see a further easing in the core PPI rate. Separately, ECB President Lagarde is due to speak at an event organised by the Central Bank of Cyprus.

US factory orders expected to have declined for a second successive month
In the US, today will bring the latest factory orders data for August. The advance durable goods orders release reported a drop in total orders of 0.2%M/M. And our colleagues in Daiwa America expect similar weakness in non-durable goods orders too, in part driven by lower prices of petroleum and coal products. Non-durable bookings excluding petroleum and coal could rise slightly, as higher prices offset softening real activity. Meanwhile, ahead of Friday’s payrolls report, the latest JOLTS job openings figures for August are also due for release. Separately, there are several Fed Governors speaking today, including Vice-Chair Williams, Mester, Logan, and Jefferson. 

Categories : 

Back to research list

Disclaimer

This research report is produced by Daiwa Securities Co. Ltd., and/or its affiliates and is distributed by Daiwa Capital Markets Europe Limited in the European Union, Iceland, Liechtenstein, Norway and Switzerland. Daiwa Capital Markets Europe Limited is authorised and regulated by The Financial Conduct Authority and is a member of the London Stock Exchange and Eurex Exchange. Daiwa Capital Markets Europe Limited and its affiliates may, from time to time, to the extent permitted by law, participate or invest in other financing transactions with the issuers of the securities referred to herein (the “Securities”), perform services for or solicit business from such issuers, and/or have a position or effect transactions in the Securities or options thereof and/or may have acted as an underwriter during the past twelve months for the issuer of such securities. In addition, employees of Daiwa Capital Markets Europe Limited and its affiliates may have positions and effect transactions in such securities or options and may serve as Directors of such issuers. Daiwa Capital Markets Europe Limited may, to the extent permitted by applicable UK law and other applicable law or regulation, effect transactions in the Securities before this material is published to recipients.

This publication is intended for investors who are not Retail Clients in the United Kingdom within the meaning of the Rules of the FCA and should not therefore be distributed to such Retail Clients in the United Kingdom. Should you enter into investment business with Daiwa Capital Markets Europe’s affiliates outside the United Kingdom, we are obliged to advise that the protection afforded by the United Kingdom regulatory system may not apply; in particular, the benefits of the Financial Services Compensation Scheme may not be available.


Daiwa Capital Markets Europe Limited has in place organisational arrangements for the prevention and avoidance of conflicts of interest. Our conflict management policy is available at  /about-us/corporate-governance-regulatory. Regulatory disclosures of investment banking relationships are available at https://daiwa3.bluematrix.com/sellside/Disclosures.action.