Handbags & The Yen
Japan’s core inflation rose to +0.7% y/y in July, the fastest pace since Nov. 2008. That brings us a step closer to the BoJ’s 2% target and suggests Governor Kuroda’s policies are bearing fruit. But think again. The CPI basket consists of many categories (Chart 2) and hundreds of product types. ‘Handbags’ are a tiny component but they speak volumes about what is really happening here. The price of locally-produced handbags fell over the past year (-0.9% y/y) while imported handbag prices rose +27.5% y/y. It is no coincidence that USDJPY climbed 25.8% over the same period.
Read the full report: UBS