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Japan's Headline CPI Cools While Service Prices Rise

Japan's consumer price index, excluding fresh food items, climbed an expected 2.5% year-on-year down from 2.9% the month before. The slower rise was attributed to deeper falls in energy costs and a slowdown in the rise of processed food prices, as reported by the internal affairs ministry on Friday.


However, service prices surged by 2.3%, marking the fastest increase since October 1993, indicating that underlying price growth is increasingly spreading throughout the economy.


Given BoJ governor Ueda explicitly mentioned he was closely watching service prices, this is another development supporting the end of NIRP.


Our take: The waiting game continues after the BoJ stayed pat in December but it is just of a matter of when not if we see the end of NIRP.


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