Japan’s CPI Falls Again

Japan’s consumer prices fell for an eighth straight month — the longest streak of declines since 2009-2011, underlining how distant the nation is from achieving its 2 percent inflation target.

Key Points

  • Consumer prices excluding fresh food, the Bank of Japan’s primary gauge of inflation, dropped 0.4 percent in October from a year earlier (forecast -0.4 percent.).
  • Overall consumer prices rose 0.1 percent (forecast unchanged), with a spike in fresh food prices compensating for continued falls in energy costs.
  • Consumer prices excluding food and energy rose 0.2 percent (forecast +0.1 percent).

Big Picture

The continued fall in prices underscores the struggle to break a cycle that’s reinforced by weak gains in wages, poor consumer sentiment and retailers who compete fiercely through discounting. Even after Governor Haruhiko Kuroda pledged to overshoot the inflation target, households and companies have yet to fully shake off their “deflationary mindset.”

For the fiscal year through March, the bank expects prices to drop 0.1 percent, a stark contrast from its prediction of a 2.1 percent gain in April 2014. There are expectations that the government may increase fiscal spending next year as the BOJ struggles.

One bright spot may be the impact of Donald Trump’s victory in the U.S. election, which has weakened the yen, creating inflationary pressures through higher import prices, while also boosting corporate profits in Japan.
Economist Comments

“Special factors like oil, fresh food and the yen are moving inflation data, but the price trend remains weak,” said Taro Saito, director of economic research at NLI Research Institute who correctly forecast the 0.4% drop in core consumer prices. We’re not seeing underlying strong inflation where robust wage growth leads to strong consumer spending and companies get comfortable with raising prices, he said.

“The drop in inflation probably hit bottom at around -0.5 percent but it won’t accelerate toward 2 percent quickly as the BOJ expects” said Hideo Hayakawa, a former BOJ chief economist. It will be just above 0 percent even early next year, he said, speaking before the data. The BOJ maintains its lofty price forecasts just because it wants to convince companies to increase salaries, he said.


  • Fresh food prices jumped 11.4 percent in October due to typhoons and poor summer weather. This contributed almost 0.5 percentage point to the rise in overall CPI.
  • Energy costs dropped 7.9 percent , dragging down inflation by almost 0.6 percentage point.
  • Core prices fell 0.4 percent in November in Tokyo as forecast.
    In the capital, overall CPI rose 0.5 percent, and was unchanged when you exclude food and energy costs.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell