–Processed Food Prices Continue to Lead Consumer Inflation, Pushing Up CPI Annual Rate by Nearly 2 Percentage Points
–Total CPI Annual Rate Also Moderates to 11-Month Low of 2.9% from 3.2% in July after Hitting 41-Year High of 4.4% in January
–Narrow CPI (Ex-Fresh Food, Energy) Annual Rate Remains at 41-Year High of 4.0%
By Max Sato
(MaceNews) – Consumer inflation in Tokyo, the leading indicator of the national average, moderated more than expected to 2.8% in August from 3.0% in July in core CPI (excluding fresh food) and to 2.9% from 3.2% in total CPI, as utility charges fell at a faster pace and elevated processed food prices showed signs of peaking, data from the Ministry of Internal Affairs and Communications released Friday showed.
The core-core CPI (excluding fresh food and energy) annual rate remained at a 41-year high of 4.0% in August, unchanged from July and coming in slightly softer than forecast.
The key points from the Tokyo CPI data:
* The core consumer price index (excluding fresh food) in the capital’s 23 wards rose 2.8% in August, coming in slightly below the median economist forecast of a 2.9% rise (forecasts ranged from 2.6% to 3.2% gains). It is the 24th straight year-over-year rise but the slowest in 11 months, since the 2.8% rise seen in September 2022. It followed increases of 3.0% in July, 3.2% in June, 3.1% in May, 3.5% in April, 3.2% in March, 3.3% in February and 4.3% in January.
* In January, the core CPI’s annual rate rose at the fastest pace in more than 41 years, since the 4.3% rise in May 1981, with or without the direct impact of the sales tax hikes in 2014 and 1997 and the introduction of the tax in April 1989. Even during the 12-month period of being boosted by a sharp sales tax hike to 8% from 5% in April 2014, the core CPI peaked at a 2.8% rise. The sales tax is currently at 10% after another rise in 2019.
* The prices of goods excluding fresh food rose 4.0% from a year earlier in August, pushing up the Tokyo area total CPI by 1.63 percentage points, with the pace of increase decelerating from 4.5% (a positive 1.84-point contribution) in July. The prices of services excluding owners’ equivalent rent gained 3.0% on the year, adding 1.07 points to the CPI, up further from a 2.9% increase (plus 1.03 points) the previous month. The uptrend in services costs reflects moves among many firms to raise wages at the fastest pace in 30 years to secure workers.
* The core-core CPI (excluding fresh food and energy) — a key indicator of the underlying trend of inflation — rose 4.0% on the year in August for the 17th straight rise. It was also just below the median forecast of a 4.1% rise. It followed increases of 4.0% in July, 3.8% in June, 3.9% in May, 3.8% in April, 3.4% in March, 3.1% in February and 3.0% in January. The 4.0% gain remains the highest in 41 years, since the 4.2% rise in April 1982. This measure is not affected by fluctuations in energy prices but it has been on an uptrend in the face of markups in processed food and durable goods.
* The total CPI gained 2.9% on year in August, marking the 24th straight year-over-year gain and coming in below the median forecast of a 3.0% rise (forecasts ranged from 2.7% to 3.3% gains). It is the slowest rise in 11 months, since the 2.8% gain in September 2022. It followed increases of 3.2% each in July, June and May, 3.5% in April, 3.3% in March, 3.4% in February and 4.4% in January. The 4.4% increase in January is the largest in more than 41 years, since the 4.8% gain in June 1981.
* Fresh food prices, a volatile factor, continued rising, up 4.2% on year in August, pushing up the overall index by 0.17 percentage point. The pace of increase decelerated from a 6.6% rise and a 0.27-point contribution the previous month.
* The prices for both fresh and processed food and beverages — ranging from fish, meat and eggs to buns, puddings, and beer — continued pushing consumer inflation higher from year-earlier levels as many firms have been raising prices to reflect higher costs seen earlier.
* Food excluding perishables rose 8.9% on year (a 1.93-point contribution to the total CPI) in August, after rising 9.0% in July with a 1.95-point contribution. This category replaced energy as the largest contributor to the CPI increase in October 2022 (1.27 points vs. 1.20 points) and the gap between the two has widened further as overall energy prices have eased from last year’s high levels.
* Energy prices slumped 15.9% on year in August, pushing down the total index by 0.93 percentage point, after falling 11.9% (minus 0.69 point) in July.
* In the energy category, gasoline prices rose 9.1% on the year with a positive 0.06-point contribution to the total CPI in August, up from a 1.6% rise (plus 0.01 point) in July. It reflects a rebound in crude oil import costs and the move by the Japanese government to scale back the subsides to refineries.
* Electricity charges plunged 22.3% (minus 0.74 point) in August after dipping 16.7% (minus 0.54 point). The prices for natural gas supplied to homes via pipelines fell 14.0% (minus 0.25 point) after falling 9.1% (minus 0.17 point) the previous month. To help ease the pain of high costs for daily necessities, the government has been providing subsidies for electricity and natural gas since January (reflected in February bills onward). The program is scheduled to end in September but there is talk among ruling party officials to extend it amid the recent drop in the Kishida government approval rating.
* The prices for household durable goods posted their 17th straight year-over-year increase in August but the pace of the increase slowed to 1.2% with just a 0.01-point contribution after rising 3.5% (plus 0.04 point) in July.
* Accommodations costs jumped 18.1% from a year earlier with a positive 0.24-point contribution in August, accelerating from a 15.1% rise (plus 0.18 point) in July, as pent-up demand for spending on services outpaced the slightly downward effects of travel subsidies.