–Total CPI Annual Rate Rises to 2.3% from 2.2% as Expected
–Core-Core CPI (Ex-Fresh Food, Energy) Also Accelerates to 1.8% from 1.7%
By Max Sato
(MaceNews) – Consumer inflation in Tokyo, the leading indicator of the national average, accelerated in June in all three key measures on higher utility costs due to reduced subsidies and renewed upward pressures from rising import costs amid the protracted weakness of the yen, data from the Ministry of Internal Affairs and Communications released Friday showed.
Hot weather boosted demand for air conditioners, leading to higher durable goods prices, and hotel fees also helped pushed up inflation. The increase in processed food has peaked but the item remains the largest contributor, raising the total CPI by 0.70 percentage point, while energy prices added 0.38 point to the index.
The core CPI (excluding fresh food), closely watched by the Bank of Japan, posted a 2.1% increase on year, just above the median forecast of 2.0%, after picking up to 1.9% in May from a 25-month low of 1.6% in April, when completely free high school education took effect in the capital.
The year-over-year rise in the total CPI accelerated to 2.3%, as expected, after rising to 2.2% in May from a three-month low of 1.8% in April. The core-core CPI (excluding fresh food and energy) annual rate rose to 1.8% from a 20-month low of 1.7 % in May, coming in slightly higher than the median forecast of a 1.7% rise.
Services costs have lost upward momentum in recent months as wages for medical and welfare service workers and education support providers remain depressed despite the highest overall wage hikes in 33 years for employees at large firms this year. Services prices in Tokyo have also been pushed down by the metropolitan government’s move in April to add its own financial support to national subsidies, effectively making all public and private high schools in the prefecture tuition free.
The prices of services excluding owners’ equivalent rent rose 1.1% on year in June, contributing 0.38 point to the Tokyo CPI, up from a 0.7% rise (plus 0.26 point) in May. The annual rate of goods prices excluding fresh food accelerated to 3.7% (adding 1.54 points) after rising to 3.6% (plus 1.48 points) in May from 2.5% (plus 1.06 points) in April in light of higher utility costs.
Other details from the Tokyo CPI data:
* The general slowdown of the core measure began in February 2023, when it eased sharply to 3.3% from a 41-year high of 4.3% in January 2023 as the effects of government subsidies for electricity and natural gas utilities kicked in.
* Fresh food prices, a volatile factor, rose 7.3% on year in June, pushing up the overall index by 0.30 percentage point, following an 8.7% rise and a 0.37-point contribution the previous month. Fresh vegetable prices remain high due to poor crops caused by bad weather in April.
* Food excluding perishables rose 3.0 percent on year (a 0.70-point contribution to the total CPI) in June, after rising 3.2% in April (plus 0.73 point). This category replaced energy as the largest positive contributor to the CPI increase in October 2022 (1.27 points vs. 1.20 points).
* Energy prices rose 7.5% on year in June, pushing up the total index by 0.38 percentage point, after rising 5.9% (plus 0.29 point) in May and falling 2.9% in April (minus 0.15 point).
* In the energy category, gasoline prices rose 3.4% on the year with a positive 0.02-point contribution to the CPI after a 4.1% rise (plus 0.02 point) the previous month.
* Electricity charges rose 10.8% on the year (plus 0.29 point) after rising 13.1% (plus 0.33 point) in May and slipping 2.1% (minus 0.06 point) in April. The prices for natural gas supplied to homes rose 3.8% (plus 0.06 point) after falling 3.9% (minus 0.07 point) in May. The government provided subsidies for electricity and natural gas from January 2023 (reflected in February bills onward) until the end of May 2024. It will provide one-off subsidies for three months through October when air conditioner use pushes up electricity bills.
* The prices for household durable goods rose 7.8% with a positive 0.10-point contribution to the CPI in June after rising 4.1% (plus 0.05 point) in May and falling 3.8% (minus 0.05 point) in April.
* Accommodations costs rose 19.9% on the year with a positive 0.23-point contribution in June, up from increases of 14.7% (plus 0.19 point) in May and 18.8% (plus 0.23 point) in April but down from a 27.7% rise (plus 0.31 point) in March. The surge in hotel fees seen late last year is largely in reaction to a slump that began in late 2022. The government in October that year began subsidizing domestic travel under a new nationwide program, lowering the costs for tourism as part of economic stimulus measures through the first half of 2023 in many regions.