All-Japan core inflation rate for November lower than consensus - Nomura

Analysts at Nomura explained the all-Japan core CPI for November was -0.4% y-y, unchanged from the previous month, and below the consensus forecast of -0.3%.

Key Quotes:

"A break down shows that core core CPI contributed to a slowdown in core CPI while energy prices contributed to acceleration and the two factors cancelled each other out.

The all-Japan core core CPI for November came to +0.1%, down from +0.2% in October, matching the consensus forecast. These results appear to be generally consistent with the November data for Tokyo announced last month.

November estimates for the Bank of Japan's core CPI (excluding fresh food and energy) put inflation based on this measure at +0.2% y-y, down from the October
reading of +0.3%.

All-Japan core CPI expected to recover, but external environment warrants caution

We expect all-Japan core CPI to swing upward y-y in Jan-Mar 2017 on a drop off in the negative effects of energy prices. We expect all-Japan core CPI for Oct-Dec to accelerate to around +1%, owing in part to recovery in the core core component as well. That said, many unknowns, such as economic policies under the US's incoming Trump administration and the output reductions agreed upon by oil producing nations, and we believe it will be important to keep a close eye on how changes to the external environment, namely forex rates and crude oil prices, impact Japan’s inflation rate."