FLJP - Japan: Stronger-Than-Expected Retail Sales Softer-Than-Expected Industrial Production

2024-03-29 03:55:00 ET

Summary

• Thursday's data releases were a bit mixed with weaker-than-expected IP and stronger-than-expected retail sales.
• Tokyo inflation hasn't changed much above the 2% level.
• We believe that the Bank of Japan will pay more attention to the improvement in retail sales and sticky inflation data than to weak IP and labour results driven by an idiosyncratic factor.

By Min Joo Kang

Tokyo consumer prices unexpectedly rose 2.6% YoY in March

A leading indicator of nationwide consumer prices, Tokyo consumer prices rebounded to 2.6% year-on-year in March (vs a revised 2.5% in February, 2.5% market consensus). Core inflation excluding fresh food, a preferred measure for the BoJ, eased to 2.4% (vs 2.5% in February, 2.4% market consensus), but we don't think this would have any impact on the Bank of Japan's policy normalisation ahead. We expect inflation to ease, but to remain above 2% for a considerable time. On a monthly comparison, the Tokyo CPI accelerated to 0.3% month-on-month sa, rising for four months in a row. The gain in goods prices (0.5%) was more significant, indicating that companies set prices higher in the belief that consumers' willingness to pay wouldn't be hurt too much. The rise in service prices (0.1%) were relatively modest, but have stayed on an upward trend for 12 months in a row. With stronger-than-expected wage negotiation results for FY24, the BoJ's sustainable inflation growth target is achievable this year....

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