By Max Sato
–Gasoline Prices on Clear Uptrend But Energy Costs Still Down on Year
(MaceNews) – Consumer prices in Tokyo, a leading indicator of the national average, posted a slightly larger year-on-year drop in the core reading in April, compared to March, as mobile carriers lowered communications fees in response to a government request, data from the Ministry of Internal Affairs and Communications released Friday showed.
Two of the three key CPI measures were still slightly below year-earlier levels in April, mainly due to lower utilities charges, although gasoline prices marked the second straight month of gains. The downward effect of government subsidies for private university tuition that began last April had waned.
The key points from the CPI data:
- The core consumer price index (excluding fresh food) in the capital’s 23 wards fell 0.2% on year in April for the ninth straight month of year-on-year decline, after slipping 0.1% in March and improving from a 0.9% slump in December. The figure came in weaker than the median economist forecast of being unchanged but it was not a surprise. Some economists had revised down their initial forecasts to reflect news that the ministry was counting in discounts on mobile communication fees that were offered online.
- The core-core CPI (excluding fresh food and energy) – a key indicator of the underlying trend of inflation – was unchanged on year in April after rising in the previous three months (+0.3% in March).
- The total CPI slumped 0.6% on year this month after dipping 0.2% in March. Fresh food prices plunged 8.0% y/y, pushing down the overall index by 0.35 percentage point in April after -1.5% (a negative 0.06-point contribution) in March.
- The biggest factor behind the year-on-year decline in the core and total CPI was lower mobile communications fees, which fell 26.5% on year and trimmed the total CPI by 0.41 percentage point in April, compared to a 1.9% rise (+0.03 point) in March. Prime Minister Yoshihide Suga, who took office last year, has been urging mobile carries to lower voice and data communications costs since he was chief cabinet secretary to his predecessor Shinzo Abe.
- The impact of lower energy costs, particularly from utilities, continued to ease. Energy prices fell 4.7%, lowering the total index by 0.24 percentage point (vs. -7.8%, -0.41 point the previous month). Gasoline prices jumped 13.1% y/y this month, pushing up the index by 0.08 percentage point, after posting the first year-on-year gain in many months in March (+2.1%, +0.02 point).
- Food excluding perishables was unchanged y/y in April (+0.00 percentage point) vs. unchanged (-0.01 point) in March.
- Accommodations +3.1% y/y (+0.04 point contribution) in April vs. unchanged (zero contribution) in March, in the absence of subsidized discounts. The government suspended its controversial ‘Go To Travel’ campaign, effective on Dec. 28, after seeing a spike in new coronavirus cases. The program was launched in July to subsize hefty discounts on hotel fees and domestic transportation costs, and was aimed at shoring up the hard-hit tourism industry.
- Among gainers, household durable goods, such as heat pumps (air conditioners), +7.2% y/y (a positive 0.07-point contribution) in April vs. +7.0% (+0.07 point) in March. Demand for electric appliances and furniture remains strong in stay-home lifestyles during the pandemic.
- The base effect of subsidized private university tuition, which were took effect in April 2020, has waned. Those tuitions now rose 0.7% on year this month (+0.01 point contribution) after falling 4.0% (-0.09 point) in March.
BOJ Revises Down FY21 CPI Outlook
The Bank of Japan said Tuesday it is maintaining its policy stance, as expected, after adding new tools and tweaking existing schemes to make its monetary easing response “more flexible and nimble” last month.
In its quarterly update on the medium-term outlook, the central bank turned more upbeat about economic growth in the next couple of years on the assumption that the drag from the global pandemic should “almost subside” in the middle of the bank’s projection period (around 2022), thanks to vaccinations.
The bank expects inflation to pick up gradually from around zero now and reach 1% in about two to three years, but that would be still only hallway toward its 2% target set in January 2013, a few months before Governor Haruhiko Kuroda took office and launched a reflationary campaign with massive asset purchases.
The BOJ board’s median inflation forecast for fiscal 2021 was revised down to +0.1% from +0.5% made in January in light of reductions in mobile phone charges by many carriers for various plans. The forecast for fiscal 2022 was revised up to +0.8% from +0.7%.
In its first estimate, the board projected that the core CPI would rise 1.0% in fiscal 2023 ending in March 2024, which is still far below the BOJ’s 2% target.
The second five-year term of Governor Kuroda is scheduled to end on April 8, 2023.
Govt Sees Economic Pickup Despite Pandemic
Last week the government resumed 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 prompted prefectural governors to ask shops, restaurants, bars and event venues to close during the emergency period.
Amid sluggish approval ratings, Prime Minister Suga is facing the tough task of containing the spread of COVID-19 variants amid the slow vaccine rollout in Japan, just three months before the opening of the Tokyo Olympics if the games take place as planned.
The state of emergency is in 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.
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Contact this reporter: max@macenews.com.
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