Today’s surprise drop in Japanese CPI sparked some major worries about the ability of the Bank of Japan to remain hawkish and support the currency.
However yesterday Morgan Stanley MUFG Securities economists warned there could be quirks in the data. High school tuition in Tokyo was effectively eliminated in Tokyo and took effect in April.
It wasn’t clear how the statistics agency would deal with that factor but it appears that it led to a large one-off drop in prices. Morgan Stanley MUFG Securities estimated it could cut 0.7 percentage points from core inflation and the reading missed by 0.5 pp.
The special factor helps to explain why the yen largely ignored the release.