By Max Sato
–Hotel Fees Stop Falling Without Subsidized Discounts
(MaceNews) – The recent pickup in energy markets eased downward pressure on Japanese consumer prices in March, data from the Ministry of Internal Affairs and Communication released Friday showed, but the outlook for growth and inflation remains uncertain amid a renewed spike in coronavirus infections in many cities.
Two of the three key CPI measures were still below year-earlier levels, mainly due to lower utilities charges and auto insurance premiums. This is the last month to see the dampening base effect of subsidized university tuitions, which were introduced in April 2020.
The Bank of Japan’s policy board is unlikely to make major changes to its medium-term forecasts for GDP and CPI when the bank releases its quarterly Outlook Report after the next two-day meeting ending Tuesday.
The key points from CPI data:
- The national average core consumer price index (excluding fresh food) edged down 0.1% from a year earlier in March, as expected, after slipping 0.4% in February and 0.6% in January. The easing in the pace of drop was mainly due to the first year-on-year rise in gasoline prices in many months, which partly offset y/y drops in heating oil and utility costs. While auto insurance premiums and university tuitions fell from a year earlier, the costs for property insurance, heat pumps (air conditioners) and tobacco rose.
- It was the eighth straight year-on-year decline in the core CPI, and the 10th in the past 12 months.
- In fiscal 2020 that ended on March 31, the core CPI fell 0.4% on average from a year earlier, posting the first annual drop in four years after rising 0.6% in fiscal 2019.
- The underlying inflation rate – measured by the core-core CPI (excluding fresh food and energy) – rose 0.3% on year in March for the third straight y/y gain after rising 0.2% in February. This narrow measure of inflation posted the eighth consecutive year of gains in fiscal 2020, although the pace of increase decelerated to +0.1% from +0.6% the previous year.
- Total CPI dipped 0.2% on year in March after easing 0.4% in February. Fresh food prices slumped 1.5% on year after being unchanged the previous month. In fiscal 2020, the total index slipped 0.2%, the first drop in four years after +0.5% in fiscal 2019.
- Among key components of the CPI basket of goods and services: Energy -4.3% y/y (-0.34 percentage point contribution) in March vs. -7.2% (-0.57 point) in February; gasoline +0.9% y/y (+0.02 point) vs. -6.2% (-0.14 point); food excluding perishables unchanged y/y (+0.01 point) vs. unchanged (-0.01 point).
- Household durable goods prices remained on the uptrend, up +4.4% on year (+0.05 point contribution) vs. +3.1% (+0.03 point) the previous month. Stay-home COVID lifestyles has pushed up demand for electric appliances and furniture.
- Accommodations unchanged y/y (+0.00 point contribution) in March vs. -5.1% (-0.06 point) in February. Hotels were forced to cut prices in February amid sluggish demand as people refrained from traveling outside of their areas. From December to January, the downward pressure from accommodations eased sharpy after the government suspended its controversial program to support the tourism industry with subsidized hefty discounts on domestic travel.
Government Forced To Resume Emergency Measures
The government was expected Friday to officially decide to resume its call for stricter social-distancing and stay-home practices in major commercial hubs, being forced to declare a “state of emergency” again for Tokyo as well as western prefectures of Osaka, Kyoto and Hyogo, only a month after it lifted such measures for Tokyo and its neighbouring jurisdictions.
The latest action will allow prefectural governors to get shops, restaurants, bars and event venues to close during the emergency period.
Amid sluggish approval ratings, Prime Minister Yoshihide Suga is facing the tough task of containing the spread of COVID-19 variants, just three months before the opening of the Tokyo Olympics if the games take place as planned.
The state of emergency is expected to take effect for about three weeks through mid-May. Before the pandemic, the Golden Week holidays from April 29 until May 5 were one of the busiest times of year for the tourism and entertainment industries.
Opinion polls had shown that many people were opposed to easing COVID-19 safety rules last month amid the threat of a fourth wave of new coronavirus cases.
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Contact this reporter: max@macenews.com.
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