Japan: Solid services inflation backs BoJ stance – Societe Generale

Societe Generale economists Reo Sakida and Jin Kenzaki review latest Japan inflation data, noting Headline at 1.5%, Core at 2.0% and Core-core at 2.6%. They highlight that disinflation is mainly driven by non-fresh food and temporary gasoline tax cuts, while underlying service-sector inflation and price revision activity remain firm, supporting Bank of Japan policy normalization prospects.

Japan inflation mix supports BoJ normalization

"Disinflation was again driven mainly by non‑fresh food, lowering core inflation by 0.15pp."

"Headline inflation dipped below 2% for the first time since Mar‑22."

"Provisional tax cut on gasoline prices helped deceleration by 0.17pp."

"Nevertheless, underlying inflation conditions remain solid. The y/y distribution of service‑sector items remains elevated."

"In addition, service‑price revision activity for January was the most active since 2021, which suggests that the April service‑price revisions are likely to be a positive outcome for BoJ."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)