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Real inflation? – Time to revive old concepts! 着実なインフレと思わない

Issue

The “flash” release of consumer prices in central Tokyo for November show Japan’s CPI is back in positive territory for the first time in 15 years, with accompanying headlines. Never mind that the current level is barely positive (and that for most of the period the level was barely negative); we’re told that Abenomics is working.

That judgement is premature. To date the rise in consumer prices is limited to energy (including the hike in electricity prices thanks to the nuclear shut-down) and imported goods (the weaker yen). While the overall index shows a 0.9% year-over-year rise, that falls to 0.2% once food and energy are excluded. Then there are import prices; TVs contributed 0.1 percentage points to the total, while overseas “package” vacations were up 12.6% in price. However, domestic services are the biggest part of consumption, and health care costs dropped 0.9% relative to November 2012. So in my reading the data provide no indication that the rise in consumer prices will continue after these one-time effects – the nuclear shutdown, the yen depreciation – work through the economy. [See here for the data.] (more…)

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