No sign of inflation in Japan

At least consumer price data in Japan came in slightly above expectations yesterday. Even though the national inflation index came in a tenth below the May result at 0.4% yoy it also came in a tenth above expectations. Of course this cannot exactly be called inflation pressure. 

On a seasonally adjusted basis prices stagnated mom. In the metropolitan area of Tokyo, where July inflation data has been published today, prices even fell slightly on a mom basis. By now the price rise caused by the VAT hike last year has been completely eliminated from the data. 

There is no evidence of secondary or second round effects. The chart below demonstrates that the underlying price trend has already returned to zero. Of course the bank of Japan has so far stuck to its official view that in the first half of the fiscal year 2016 prices will reach their target of 2%. 

At the same time the central bank is also referring to the continuous rise in the underlying price trend, a point of view that the data has not confirmed over the past few months. JPY was unaffected by today's data, EUR-JPY even approached the 124 mark on the Asian markets. 

"Not many participants seem to worry that the BoJ might introduce further steps in the near future. That is probably due to the fact that the central bank has simply run out of measures to implement", says Commerzbank.