National inflation data is due from Japan on Friday 24 August

Which will be 2330GMT on 23 August 2018

  • National CPI y/y for July , expected is 1.0%, prior was 0.7%
  • National CPI y/y excluding Fresh Food, expected is 0.9%, prior was 0.8%
  • National CPI excluding Food, Energy y/y, expected is 0.3%, prior was 0.2% . This is the measure of CPI closest to the US 'core' CPI and is the one to watch

Barclays preview:

  • We estimate that the nationwide CPI ex-perishables (core) rose 1.0% y/y in July (June: 0.8%).
  • We expect core inflation to nudge up to 1.1% y/y over the next three months, then ease slightly as the contribution from oil prices and exchange rates peaks out

More generally on Japan inflation from Barclays:

  • Even assuming the output gap continues to improve (inflation gap continues to widen) as a trend on the back of sustained above-potential growth through H1 FY19, we expect CPI inflation to remain sluggish. As evident from the trend in real employee compensation in the Q2 GDP data (+3.8% y/y; Q1: +2.0% y/y), the household income environment has improved steadily on the back of higher wages. However, wage growth (unit labor costs, especially in labor-intensive service industries) has yet to reflect significantly on inflation due in part to the cautious pricing strategies adopted by Japanese companies (deflation inertia), as highlighted by the BoJ. Also, importantly, the CPI understates inflation due to a statistical failure to account for effective price hikes resulting from "adjustments to quality," as widely observed in services. Under such conditions, it may be difficult to reach the CPI price stability target of +2%, regardless of how the BoJ manages monetary policy. We believe CPI inflation is likely to converge toward a much lower rate of around +1% y/y

Daiwa preview:

  • The BoJ will be hoping that this mimics the modest lift in inflation reported in the advance survey for the Tokyo area.
  • Bloomberg's survey indicates that the market expects both the BoJ's forecast core measure (i.e. ex fresh food) and preferred core measure (i.e. ex fresh food and energy) to rise by 0.1ppt to 0.9%Y/Y and 0.3%Y/Y respectively, but the headline CPI to rise a larger 0.3ppt to 1.0%Y/Y.