–Core CPI (Ex-Fresh Food) Up 2.7% Y/Y After Slowing to 2.5% in September
–Processed Food Still Leads CPI Y/Y Rise but Markups Appear to Have Peaked
–Total CPI Annual Rate Jumps to 6-Month High of 3.3% from 2.8% in September on Fresh Food Price Surge
–Core-Core CPI (Ex-Fresh Food, Energy) Annual Rate Eases to 3.8% from Upwardly Revised 3.9%
By Max Sato
(MaceNews) – Consumer inflation in Tokyo, the leading indicator of the national average, unexpectedly accelerated to 2.7% in October in the core CPI (excluding fresh food) after slowing to a 14-month low of 2.5% in September as halved subsidies for electricity and natural gas utilities slowed the recent sharp drop in overall energy costs, offsetting the effects of smaller processed food markups, data from the Ministry of Internal Affairs and Communications released Friday showed.
Inflation measured by the total CPI jumped to a six-month high of 3.3% on a double-digit percentage point surge in fresh food prices, also an unexpected move, after easing to 2.8% in September. Pent-up demand for traveling among Japanese and resumed group tours from China boosted hotel fees while higher internet charges and durable goods prices also helped push up the inflation rate.
The core-core CPI (excluding fresh food and energy) annual rate eased only slightly to a four-month low of 3.8% from an upwardly revised 3.9% in September and a 41-year high of 4.0% in September and August.
The key points from the Tokyo CPI data:
* The core consumer price index (excluding fresh food) in the capital’s 23 wards rose 2.7% in October, above the median economist forecast of a 2.5% rise (forecasts ranged from 2.4% to 2.7% gains). It is the 26th straight year-over-year rise, following increases of 2.5% in September (the slowest since 2.3% in July 2022), 2.8% in August and 3.0% in July. It eased sharply to 3.2% in February from 4.3% in January as the effects of government subsidies for electricity and natural gas utilities kicked in.
* The surge in January is the fastest in more than 41 years, since 4.3% 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 3.4% from a year earlier in October, pushing up the Tokyo area total CPI by 1.42 percentage points, with the pace of increase picking up from an upwardly revised 3.3% (a positive 1.34-point contribution) in September after a recent slowdown. The prices of services excluding owners’ equivalent rent gained 3.3% on the year, adding 1.15 points to the CPI, after rising 2.9% (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 3.8% on the year in October for the 19th straight rise. It was also above the median forecast of a 3.6% rise (forecasts ranged from 3.6% to 3.9%). It followed increases of 3.9% (revised up from 3.8%) in September, 4.0% in August and in July and 3.8% in June and 3.0% at the start of the year.
* The 4.0% gain in the narrow core is 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 as well as rising services costs.
* The total CPI rose 3.3% on year in October, marking the 26th straight year-over-year gain and posting the fastest rise since 3.5% in April this year. It was well above the median forecast of a 2.8% rise (forecasts ranged from 2.7% to 2.9% gains). It followed increases of 2.8% in September (the slowest since 2.8% in September 2022), 2.9% in August and 3.2% in July and June. The annual rate fell to 3.4% in February from 4.4% in January, which is the largest increase in more than 41 years, since the 4.8% gain in June 1981.
* Fresh food prices, a volatile factor, continued rising, up 16.3% on year in October, pushing up the overall index by 0.67 percentage point. The pace of increase accelerated sharply from a revised 10.1% rise and a 0.41-point contribution the previous month.
* The prices for both fresh and processed food and beverages — ranging from vegetables, meat and milk to buns, puddings and hamburger steaks (eating out) — continued pushing consumer inflation higher from year-earlier levels as many firms had raised prices to reflect higher costs seen earlier, although the pace of markups seems to have peaked.
* Food excluding perishables rose 7.3% on year (a 1.61-point contribution to the total CPI) in October after rising 8.5% in September with a 1.86-point contribution. This category replaced energy as the largest contributor to the CPI increase in October 2022 (1.27 points vs. 1.20 points).
* Energy prices dipped 14.1% on year in October, pushing down the total index by 0.84 percentage points, with the pace of decrease slowing from a 18.7% fall (minus 1.10 points) in September.
* In the energy category, gasoline prices rose 7.4% on the year with a positive 0.04-point contribution to the total CPI in October, slowing from a 10.0% rise (plus 0.06 point) in September. Retail regular gasoline prices hit record highs from late August to early September as the government scaled back subsides to refineries. Since then, their national average eased for the seventh straight week to Oct. 23. The monthly survey on the Tokyo CPI was conducted in mid-October.
* Electricity charges fell 18.6% on the year (minus 0.62 point) in October after dipping 25.7% (minus 0.86 point) the previous month. The prices for natural gas supplied to homes slid 14.2% (minus 0.27 point) after dipping 17.1% (minus 0.31 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 was scheduled to end in September but the government has extended it through yearend.
* The prices for household durable goods posted their 19th straight year-over-year increase in October. The pace of their increase picked up to 2.7% with a 0.03-point contribution after slowing to a 0.5% rise (plus 0.01 point) in September.
* Accommodations costs soared to a 42.8% increase on the year with a positive 0.43-point contribution to the CPI in October after a 17.9% rise (plus 0.21 point) in September. People have been traveling more freely since the Japanese government widely eased Covid public health restrictions in May. The number of visitors from other countries has also recovered and is expected to rise further now that Beijing has lifted its restrictions on overseas group traveling by Chinese citizens.
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