— Lower energy prices remain key factor behind y/y fall in CPI
By Max Sato
(MaceNews) – Consumer prices in Tokyo, a leading indicator of the national average, made an unexpectedly large month-on-month rebound in January, as the government suspended discounts on leisure traveling amid surging new coronavirus cases, data from the Ministry of Internal Affairs and Communications released Friday showed.
The improvement was also due to the absence of one-off sharp drops in the prices of mobile phones and golf clubs, which added downward pressure in December.
Most of the key CPI measures were still below year-earlier levels in January, mainly due to falling utilities charges and gasoline prices as well as government-subsidized tuitions.
The government suspended the controversial ‘Go To Travel’ campaign, effective on Dec. 28, after seeing a spike in new coronavirus cases. Prime Minister Yoshihide Suga, increasing unpopular among voters for his late decision to restrict economic activity, declared a state of emergency in Tokyo and three other areas on Jan. 7 and later expanded it to a total of 11 out of Japan’s 47 prefectures. Japan hasn’t imposed a strict lockdown on any cities during the pandemic.
The suspension the government-subsidized discount program means less downward pressure on hotel and transport costs, but restrictions on business hours and commuting is putting a damper on consumer spending on eating out and traveling while expenditures on home cooking and furniture and appliances for home offices have been increasing.
The key points from the CPI data:
* The core consumer price index (excluding fresh food) in the capital’s 23 wards dipped just 0.4% on year in January, after slumping 0.9% in December, which was the sharpest drop in more than 10 years. The latest figure came in much stronger than the median economist forecast of a 0.7% fall, but was still the sixth straight month of year-on-year decline amid falling energy costs.
* The core-core CPI (excluding fresh food and energy) – a key indicator of the underlying trend of inflation – rose 0.2% on year in January, marking the first y/y gain in six months (+0.6% in July) after sliding 0.4% in December.
* The total CPI fell 0.5% this month after plunging 1.2% last month as the recent slump in fresh food prices eased (fruits and fish down; vegetables up), pushing down the total index by 0.10 percentage point in January, smaller than the 0.28-point negative contribution in December. The overall index posted the first year-over-year decrease in three years in October 2020 (-0.3%) as the base-year effects of the October 2019 sales tax hike to the current 10% from 8% faded.
* The biggest factor behind the sharper declines in both the total and core readings remained energy costs (particularly electricity and city gas), which have been sliding from year-earlier levels. Energy prices fell 10.9%, lowering the total index by 0.58 percentage point (vs. -10.2%, -0.53 point the previous month).
* Processed food prices slipped 0.2% on year in January, trimming the total CPI by 0.05 percentage point, as seen in December.
* Accommodations costs showed a remarkable upward swing, falling just 2.1% on year in January and pushing down the total CPI by only 0.03 percentage point, improving from double-digit y/y drops in recent months (-33.5% and a negative 0.53-point contribution in December).
* Among higher prices, property insurance premiums rose 8.9% on year in January, pushing up the total CPI by 0.06 percentage point after being flat in December. The prices for household durable goods continued rising, up 3.2% y/y with a positive 0.03-point contribution (+1.0%, 0.01 point the previous month).
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Contact this reporter: max@macenews.com,
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