Japan: Are Goods Inflation Risks Still Tilted to the Upside? – Societe Generale

Risks to goods inflation remain skewed upwards over the coming months, according to Societe Generale economists Reo Sakida and Jin Kenzaki, as higher upstream food prices and energy costs have not yet passed through fully to consumer prices. In Tokyo's October CPI data, they point to a further easing in food inflation alongside a slight rise in inflation for oil-related goods.

Could energy costs add to goods inflation pressures?

"The contribution from goods prices was broadly unchanged at +1.61pp (vs +1.62pp). Food prices continued to slow, with their contribution falling to +0.74pp (vs +0.86pp). This partly reflects a high base in October 2025, while food prices have yet to reflect higher upstream costs."

"In recent months, leading PPI indicators and food CPI have diverged, with consumer prices yet to follow the rise in producer prices. We expect food CPI to catch up in the coming months."

"Inflation in oil-related goods accelerated slightly to +0.20pp (vs +0.18pp), remaining on an upward trend. The contribution from these items has risen sharply over the past four months, from +0.06pp in June. Consumer prices have yet to fully reflect the latest increase in energy costs due to the ongoing unrest in the Middle East."

"With the latest increase in energy costs not yet fully reflected in consumer prices, risks to goods inflation remain tilted to the upside."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)