Japan’s January inflation eases for third month in a row to 2.2% vs. 2.6% previously due to mirror effect in energy prices (-12.1%)

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Bankinter : January CPI in Japan reaches +2.2% year-on-year vs. +1.9% expected and +2.6% previous. Underlying: +3.5% vs. +3.3% expected and +3.7% previously.

Analysis: The price indicator decelerates for the third consecutive month, although it defies expectations in both readings. This slowdown is mostly due to a mirror effect in energy prices (-12.1% year-on-year). Since, after the strong rebound in energy, as of February 2023, the government implemented subsidies to this component. Faced with an economy in technical recession (GDP: -0.1% year-on-year in Q4 and -0.8% in Q3), a weak yen and possible additional inflationary pressures from negotiated wages (Shunto), the data plays in favour of a BoJ that is abandoning its ultra-loose monetary policy.

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