Japan’s core consumer price inflation likely accelerated to 2.6% in November, driven by rising rice prices and reduced utility subsidies, according to a Reuters poll of economists. This marks an increase from the 2.3% inflation rate recorded in October.
Table Content:
Key Factors Driving Inflation
Several factors contribute to the anticipated rise in inflation. Persistently high rice prices continue to exert upward pressure on food costs. Furthermore, the Japanese government’s decision to phase out utility subsidies has led to increased energy prices for consumers, impacting electricity and city gas bills. These factors, combined with general increases in food and industrial product prices, are expected to push inflation higher. As Mizuho Research & Technologies noted, the combined effect of these price increases across various sectors is the primary driver of the projected inflation acceleration.
Trade Data and Machinery Orders
The Reuters poll also provided insights into Japan’s trade data for November. Exports are projected to have grown by 2.8% year-on-year, a slight slowdown from the 3.1% increase observed in October. Imports are estimated to have risen by 1%, leading to a trade deficit of approximately 688.9 billion yen ($4.50 billion). While global trade remains sluggish, the yen’s weakening against other currencies since mid-September likely contributed to the increase in export value, according to Takeshi Minami, chief economist at Norinchukin Research Institute.
In addition to inflation and trade data, the poll also addressed machinery orders, a key indicator of future capital spending. Machinery orders are predicted to have rebounded in October, showing a 1.2% increase from the previous month, following a 0.7% decline in September. This suggests a potential recovery in capital investment in the coming months.
Upcoming Data Releases
The Ministry of Internal Affairs will officially release the November CPI data on December 20th. The trade data will be published by the Ministry of Finance on December 18th, and the Cabinet Office will announce the machinery orders data on December 16th. These releases will provide further clarity on the state of the Japanese economy and confirm whether the projected figures align with actual results. These upcoming data releases will be closely watched by market participants for insights into the trajectory of the Japanese economy.
Conclusion
The anticipated rise in core inflation reflects the impact of various economic factors, including rising food and energy prices and the phasing out of government subsidies. While export growth is expected to moderate, the yen’s weakness may provide some support. The projected rebound in machinery orders offers a potential positive signal for future capital spending. The upcoming official data releases will be crucial in confirming these projections and shaping the outlook for the Japanese economy.
