Japan's Core CPI Hits New High in August

　　Government data released on Friday showed that Japan's core CPI (excluding volatile fresh food prices) increased by 2.8% year-on-year in August, reaching the highest level in 10 months, in line with expectations and higher than last month's 2.7%. The overall CPI inflation rate rose from 2.8% last month to 3%, marking a new high in 10 months.

　　Image source:japan.people

　　The composite index increased by 3.0%, with food prices notably rising by 3.6%. The price of regular rice soared by 29.9%, the largest increase since January 1976. August is the period when new rice begins to circulate widely, and the combination of increased dining out demand and concerns over disasters like typhoons led to panic buying among consumers.

　　Dining prices rose by 2.5% due to surging raw material costs, along with rising logistics and labor costs. Among snacks, chocolate prices increased by 12.7%, primarily due to the rising prices of cocoa beans and logistics costs.

　　Durable consumer goods increased by 7.7%, with room air conditioner prices rising by 16.1% due to the heatwave. Additionally, costs for foreign packaged travel rose by 59.4%.

　　In the energy sector, electricity prices increased by 26.2%. This was significantly impacted by the temporary end of government measures to alleviate electricity and gas costs, which began in January 2023.

　　On the other hand, gasoline prices fell by 3.8% year-on-year, turning into negative growth. This decline is attributed to government measures implemented since 2022 to curb rising gasoline prices, resulting in negative growth for gasoline prices in August 2024 due to the rebound from last August's increases.

　　Overall, commodity prices rose by 4.5%, while service prices increased by 1.4%, remaining consistent with the previous month, with labor costs for household-related services also rising.

　　This data release coincides with the conclusion of the Bank of Japan meeting, aligning with the central bank's forecast that inflation will rise due to wage increases and improved private consumption. The market widely expects the central bank to maintain interest rates at the same level later on Friday, but due to predictions of inflation rising in the coming months and into 2025, further rate hikes are possible.

　　The increase in inflation is primarily driven by significant wage hikes successfully negotiated by Japanese labor unions earlier this year, with its impact now spreading nationwide.