Japan CPI Forecast: Top Five Bank Forecasts, Inflation Likely Moderate

Japan will release December Consumer Price Index (CPI) data on Thursday, January 18 at 11:30 p.m., and as we get closer to release time, here are the forecasts from economists and researchers across five major banks on the next print of Japanese inflation.

Headline inflation is expected to be 2.5% year-on-year, up from 2.8% in November; the underlying (without fresh food), 2.3% year-on-year, compared to the 2.5% previously published; and the underlying without energy, 3.7% year-on-year, compared to 3.8%. If so, the underlying index would be the lowest since June 2022 and would be close to the 2% target.

Standard Chartered

Inflation as measured by the CPI likely dropped to 2.5% year-on-year due to falling oil prices, even amid the Middle East conflict. Core inflation excluding food also likely fell to 2.4% year-on-year. We expect core inflation excluding food and energy to have fallen to 3.7% year-on-year, still significantly high. The moderation of Tokyo CPI inflation in December supports our view. CPI inflation in Japan is being supported by labor market strength, but we expect the negative wage growth rate to hold back any further improvement.

ING

Japan's CPI inflation is expected to slow to 2.7% year-on-year in December, with falling utility and other energy prices weighing on the overall figure. However, prices in the service sector are likely to increase due to high demand for travel-related items such as accommodation and restaurants.

Deutsche Bank

We expect core inflation ex fresh food of 2.3% YoY and core inflation ex fresh food and energy of 3.7%, or +0.2% MoM in both cases.

SocGen

We forecast a drop in the national core CPI from +2.5% year-on-year in November to +2.3% year-on-year in December. The impact of high growth in 2022 will be evident, putting downward pressure on food and energy. On the other hand, we expect core CPI growth across the country to pick up in February 2024 as the downward contribution from measures to reduce the burden of electricity and gas bills disappears. On a year-on-year basis, we forecast an increase in the national core CPI of almost 3%.

Citi

We expect the national core CPI (excluding fresh food only) to rise 2.3% year-on-year in December, down from the 2.5% year-on-year gain in November. The negative energy contribution is likely to increase, reflecting the base effect. Meanwhile, the CPI excluding fresh food and energy likely rose 3.8% year-on-year in December, the same as in November. Core CPI inflation, excluding special factors (i.e. energy, mobile phone charges and hotel charges), likely rose 2.83% year-on-year in December, virtually unchanged from the 2.82% year-on-year increase recorded in November.