The CPI excluding perishables (core) turned flat y/y in May (April: -0.4%), matching both our forecast and the Bloomberg median estimate. The contraction of the negative y/y change from April to May was driven primarily by: 1) electricity charges; 2) TVs, 3) auto-related expenditure (eg, insurance) and 4) communications.
In Tokyo, the core CPI rose 0.2% y/y in June (May: 0.1%), a second consecutive gain, slightly exceeding our forecast but matching the consensus. The widening of the positive y/y change from May to June was driven by: 1) electricity charges; 2) auto-related expenditure (eg, insurance); 3) gas charges; and 4) non-perishable foods
Year-on-year changes in the Tokyo core CPI clearly trended below those in the national index from mid-2011, but this relationship reversed in April. The Tokyo lag, which had been especially noticeable in food ex-perishables, housing and furniture/household goods, is now disappearing. Although we remain cautious about viewing the Tokyo core CPI as a leading indicator of the national core CPI, we believe the latter is also poised to enter positive territory and expect an upturn in the June data.
Barclays