More stagnant Japan inflation in August

As there will be a base effect on Japan's CPI due to last year's fall in oil prices from H2 2014 to the beginning of 2015, CPI (excluding fresh food) ultimately should be below 0% yoy, the weakest point since April 2013. Since July, oil prices have been declining again. 

"Japan's nationwide CPI (excluding fresh food) likely fell to -0.1% yoy in August (was 0.0% yoy in July). Factors such as the passing on of price increases to products as a result of cost-push inflation caused by yen depreciation and the recovery in domestic demand are helping to push up inflation", says Societe Generale. 

The main driver for negative GDP growth in Q2 was weak consumption. It seems that consumers have not yet recovered completely from the deterioration in consumer sentiment after the consumption tax (CT) hike in April 2014, especially as food prices are continuously increasing.

As a result, consumers have been defensive. In addition, the second CT hike scheduled to start in April 2017 is also suppressing consumer sentiment.