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The story
Japan’s Ministry of Internal Affairs and Communications reported that the July Consumer Price Index (core CPI, excluding fresh food) rose 1.8% year-on-year, coming in below the Bank of Japan’s 2% target for the seventh consecutive month. The growth rate accelerated from June’s 1.6%, and on 5ch, users debated whether gasoline and water subsidies are artificially suppressing the index, the widening gap with the Producer Price Index, and the pros and cons of interest rate hikes and a consumption tax cut.
The Ministry of Internal Affairs and Communications announced on the 21st that the July Consumer Price Index (CPI, 2025=100), excluding volatile fresh food, stood at 102.1, up 1.8% from the same month last year. Rising utility and water costs pushed the index higher.
The figure matched the 1.8% median forecast compiled beforehand by QUICK. It marked the seventh straight month below the Bank of Japan’s 2% price stability target. The growth rate widened by 0.2 points from June’s 1.6% gain, the second consecutive month of acceleration.
In August, the Ministry of Internal Affairs and Communications switched the CPI’s base year from 2020 to 2025. Index figures from January 2025 onward are calculated under the new base.
Source: nikkei.com / Original article here
What people said
But the Strait of Hormuz risk hasn't gone away — if anything, they're saying September could be the crunch point.
The naphtha shortage still hasn't been resolved.
Apparently supply is down 20% for the year, so related prices won't stop climbing.
The real hit to retail prices is only just getting started lol
No, that's wrong.
They're just splashing tax money around to hold down gas prices and fake real wage growth.
The gilding's going to wear off soon.
Huh?
The gap between the policy rate and long-term rates is getting scary.
Some amount of policy rate hike is a necessary evil.
If you're running a weak-yen policy, falling JGB prices are inevitable.
It's not good for long-term rates and the policy rate to diverge like this.
It's less that they're raising it and more that it's rising on its own — the risk that borrowers can't repay is going up.
If they raise rates in this situation, it's game over.
That's how much they're spending on gasoline subsidies. In just 5 months they've burned through trillions of yen, leaving only 210 billion yen. At one point the subsidy was as high as 50 yen per liter. Crude prices had finally settled down and the subsidy shrank to about 5 yen per liter, but then Trump pulled another stunt and oil prices went back up.
At this rate we're going to end up as the grasshopper in the Ant and the Grasshopper.
Decades later ↓
The public: 'This inflation is way too much. Fix it now.'
The LDP should admit their policy was wrong.
You just like deflation better now because you're older and can't earn as much anymore.
If they admitted that, it would look like the DPJ's choices were right, so the LDP will never admit it, not even over their dead body…
If they cut the consumption tax, the yen's decline will accelerate
and food prices will spike dramatically too.
Just bear with it a little longer.
Farmers' and food makers' incomes will shoot up dramatically too 😊
Long-term JGB yields are rising.
Mortgage rates and other rates are climbing
regardless of the policy rate.
Any further divergence between long-term rates
and the policy rate will become a problem.
They'll have no choice but to raise long-term rates.
Takaichi could just stop the irresponsible, reckless fiscal spending — but of course she won't.
Public opinion demanding countermeasures against high prices is out of line.
There's no end to it if you keep pandering to idiotic public opinion.
Cancel the tax cut right now.
Inflation is persisting ahead of schedule,
dragged along by the price spike
from the consumption tax cut.
If they cancel the consumption tax cut, the weak yen would stop
and there's a risk prices would fall.
The consumption tax cut is the symbol of the inflation policy 😊
I saw a post on X (Twitter) with content like this yesterday.
You shouldn't take posts on X at face value…
You start wondering, 'how many years ago was this even from?'
Is the water subsidy a nationwide thing?
Tokyo's water subsidy was also in place last year,
so year-on-year, the free high school tuition seems to have a bigger effect.
That should also drop out of the calculation after a year, though.
More importantly, the seasonally adjusted month-on-month figure has been climbing since around March, and this month the core index (excluding fresh food) came in at 0.3%.
Simply annualized, that works out to over 3.6%.
You're being so nitpicky!
It's basically 2%.
If they manage to cut the consumption tax,
prices will spike anyway, so no problem!
Maybe luxury high-rise condo (tower mansion) prices still haven't gone up enough?
The Greater Tokyo area is like this…
July new condo prices in Greater Tokyo hit a record high of ¥164.93 million; in the 23 wards, ¥265.20 million [Nitamago★]
https://asahi.5ch.io/test/read.cgi/newsplus/1787227307/
From what I hear from people actually in the real estate industry, it's already peaked, buyers aren't biting, and prices are trending down.
Then just you go buy gasoline and produce at the no-subsidy price.
Exactly this.
If you don't strip out the portion where subsidies are holding prices down, you can't call it the real inflation rate, and you can't make correct decisions about things like rate hikes.
And they also need to exclude items like rice, which aren't classified as fresh food but still swing wildly.
The Producer Price Index has been staying above 7% this whole time.
Anyone who doesn't feel alarmed by that and says stuff like 'no need to raise rates' or 'we should even cut rates' — something must be wrong with their brain.
Doesn't the Producer Price Index also reflect the gasoline and electricity/gas subsidies?
If it's still at 7% even with that, that seems pretty alarming.
Background and Key Points
Japan’s core CPI (all-items excluding fresh food) is the number the Bank of Japan targets, and the BOJ has aimed for a stable 2% since adopting inflation targeting under Kuroda in 2013 as part of Abenomics, which was built to escape two decades of deflation. Missing that target for seven straight months means, from the BOJ’s own framework, that reflation still isn’t durable — even though headline prices have felt punishing to households since 2022. Two subsidy programs are doing real work on the reported number: a national gasoline subsidy (once as high as ¥50/liter, now roughly ¥5/liter after burning through most of its budget) and water/utility subsidies layered on top of one-off comparison effects like free high school tuition, all of which push the year-on-year figure down mechanically rather than reflecting market prices.
The thread’s real disagreement isn’t over the 1.8% figure itself but over what it means: one camp treats CPI as the authoritative signal and reads 1.8% as “close enough,” using it to argue against a consumption tax cut or rate hikes; the other insists the true, unsubsidized rate is already well past 2%, pointing to the Producer Price Index running above 7% as proof that cost pressure is still working its way downstream.
What outside readers likely miss is that Japan’s “core CPI” definition excludes only fresh food, not energy — unlike the US/EU convention where “core” strips out energy too — so this index is more exposed to the very subsidies distorting it. The thread also never engages with the structural rice-price shock of the past two years, a separate driver of food inflation that the subsidy debate ignores entirely.
*This article is excerpted and summarized from the 5ch (Breaking News+) thread “[Consumer Prices] Up 1.8% in July, Below 2% for 7th Straight Month — Growth Rate Widens from Previous Month“.
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