Japan Inflation

Japan's CPI fell in July dropping by 0.3% month-to-month. Over three-months the inflation rate is decelerating faster at a pace of -1.6% even as it is slowing its pace over six months compared to 12-months. But ex-food and energy inflation fell more slowly over three-months as its drop accelerated over 6-months.

Japan's inflation trends are in a bit of a twist. The chart of ex-food ex-energy inflation shows there is a broad tendency for inflation to slow its pace of decline. The more topical numbers from Tokyo also released today showed that inflation in August in the Tokyo area actually went up in absolute terms.

Japan is still as hard to pin down as it is hard to nail Jell-O to the wall. The yen continues strong and we are getting no guidance from Japanese official about how long that will go on. The economy is still weak and the global environment is still weak.

There are hints from the Tokyo August CPI numbers and from the Core inflation rate that deflation is loosening its grip in Japan. But we have seen those signals come and go before. The rising yen is one powerful force that says not to believe that deflation is over. A backtracking yen would actually add to inflation and fight deflation. Instead, Japan has a currency that is reinforcing deflation, its biggest enemy. It is too soon to take the hints of positive inflation to heart. Japan is still struggling.

Japan CPI Trends   Jul
10 Jun
10 May
10 3Mo 6Mo 12Mo Yr-Ago Q-to
Date All Items -0.3% 0.0% -0.1% -1.6% -0.6% -0.9% -8.7% -2.0%  All items less food and energy -0.1% 0.0% -0.2% -1.2% -1.8% -1.5% -3.6% -1.0%  All items except fresh food -0.3% -0.1% 0.0% -1.6% -1.4% -1.1% -8.7% -2.2% Seasonally Adjusted by Haver