Has Japan beaten deflation?

Japan has almost beaten deflation" Prime Minister Shinzo Abe announced only yesterday. And this morning BoJ governor Kuroda claimed that the trend of Japanese price developments was "strong". Well, this morning August inflation data for Japan as well as the September data for Tokyo was published.

The underlying inflation trend (i.e. the official result adjusted by one-off effects and statistical overhang) is falling again, in Tokyo it has even gone into negative territory again, says Commerzbank. In reality, and secretly Abe and Kuroda will have to admit this as well, things are not looking good for Abenomics. 

Hardly surprising that Abe had to employ all sorts of rallying calls, including a GDP target that is similarly utopian as the inflation target and the assurance that the second part of the VAT hike was going to be implemented as planned.

As the first part had not triggered price increases above the initial effect, this step will only dampen the real economy - thus providing deflationary momentum. If inflation does not pick up again the BoJ will sooner or later (probably later) have to take further measures thus putting pressure on the yen, argues Commerzbank.