Thursday, September 19, 2019 - 21:30

MNI POLICY: Japan Aug CPI Rise Slows; BOJ Cautious View Intact

By Hiroshi Inoue

TOKYO (MNI) - Japan's core CPI slowed in August, as expected, but Bank of Japan officials are still concerned there could be a further deceleration in coming months as private consumption falls off after the October consumption tax hike, MNI understands.

Japan's core CPI rose 0.5% on year in August, for the 32nd straight rise but the pace slowed from +0.6% in July and in June, and the slowdown was indicated by the August Tokyo core CPI, which slowed to +0.7% in August from +0.9% in July.

There was some better news for the BOJ within the data, including higher prices for household durable goods, which rose 5.4% on year in August vs. +3.8% in July.

However, prices for other major items slowed in August from the previous month. Prices for processes foods, accounting for 15% of the total CPI that BOJ officials focus on, rose 1.1% in August, slowing from 1.3% in July.

Prices for eating out -- another key BOJ focus -- were up 0.9% in August, also slowing from 1.0%, indicating corporate price hikes may have peaked.

Energy costs fell 0.3% on year in August (vs. +0.6% in July) and their contribution turned to -0.02 percentage point in August, reversing from +0.04 percentage point in July.

The BOJ has said that the front-loaded rise in demand before the consumption tax hike to 10% from 8% on Oct. 1 will be smaller than the previous hike in 2014, indicating a post-hike dip in demand will also be limited.

However, the BOJ continue to focus on the front-loaded rise in non-durable goods and any pre-tax hike impact on private spending.

If private consumption slows, it would impede corporate price hikes, prompt firms to lower retail prices, which in turn will push down Japan's inflation rates, the Bank fears.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
--MNI London Bureau; tel: +44 203-586-2225; email:

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