— Lower Energy Costs Remain Key Factor Behind Weak Consumer Prices
By Max Sato
(MaceNews) – The energy-led downtrend in Japanese consumer prices eased substantially in January as the government suspended discounts on leisure traveling amid surging new coronavirus cases, data from the Ministry of Internal Affairs and Communication released Friday showed.
The improvement was also due to a jump in property insurance premiums, which was somewhat offset by a fall in auto insurance costs, as well as the absence of one-off sharp drops in the prices of mobile phones and golf clubs, which had added downward pressure in December.
As seen in the Tokyo CPI data for January released last month, 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.
Friday’s data did not provide any factors to change the long-term trend of Japanese prices, which remain well below the Bank of Japan’s 2% inflation target set in 2013. In the face of weak energy prices and the deflationary mindset among households and businesses, the central bank’s massive debt purchases and zero to negative interest rates have failed to boost prices in a sustainable manner.
The key points from CPI data:
* The national average core consumer price index (excluding fresh food) dipped 0.6% from a year earlier in January after falling 1.0% in December. It was slightly firmer than the median economist forecast of a 0.7% drop. Lower utility costs remained the main force behind weak consumer prices.
* It was the sixth straight year-on-year decline in the core CPI, and the eighth in the past 12 months.
* The underlying inflation rate — measured by the core-core CPI (excluding fresh food and energy) – edged up 0.1% on year in January after falling 0.4% in December, marking the first y/y gain in six months.
* Total CPI slipped 0.6% on year in January after plunging 1.2% the previous month as the decline in fresh food prices pushed down the total index by only 0.01 percentage point after having a bigger (-0.20 point) impact in December.
* Among key components of the CPI basket of goods and services: Energy -8.6% y/y (-0.68 percentage point contribution) in January vs. -8.1% (-0.64 point) in December; food excluding perishables -0.1% y/y (-0.02 point) vs. -0.1% (-0.01 point).
* Accommodations -2.1% y/y (-0.02 point contribution) in January vs. -33.5% (-0.40 point) in December.
* New factors: Property insurance premiums +14.3% y/y (+0.09 percentage point contribution) in January vs. -0.1% (zero contribution) in December; auto insurance premiums -1.0% (-0.02 point) vs. +2.0% (+0.04 point).
* Household durable goods prices remained on the uptrend, up 3.1% on year (+0.03 point contribution) vs. +3.2% (+0.03 point) in December. Stay-home COVID lifestyles has pushed up demand for electric appliances and furniture.
Late in December, Prime Minister Yoshihide Suga suspended the controversial “Go To Travel’ program launched in July to subsidize part of domestic accommodations and transport costs in the face of surging new coronavirus cases.
The government has extended its emergency measures by one month until early March for Tokyo and nine other jurisdictions (one excluded from the original group of 11), urging bars and restaurants to close by 8 p.m., and asking people to stay home as much as possible and limit shopping to essential items. Companies have been told to help reduce the use of public transportation by allowing most of their employees to work from home.
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Contact this reporter: max@macenews.com
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