— Utility Charges Following Lead of Soaring Gasoline, Heating Oil Costs
— CPI Remains Under Pressure From Mobile Communication Fee Discounts
By Max Sato
(MaceNews) – The year-on-year rise in the core reading of consumer prices in Tokyo, the leading indicator of the national average, accelerated in November amid double-digit percentage gains in utility and fuel costs as well as widespread gains in processed food prices on global reopening demand, data from the Ministry of Internal Affairs and Communications released Friday showed.
The average price of regular gasoline in Japan remained on a seven-year high of Y169.0 ($1.49) a liter on Nov. 8, rising from Y168.7 on Nov. 1 for the 10th straight weekly rise, data from the Agency for Natural Resources and Energy showed. The latest Tokyo CPI data were collected sometime between Nov. 10 and Nov. 12 (the price in Tokyo was Y172.0 on Nov. 8, above the national average).
The base effect of higher property insurance premiums as well as double-digit percentage hotel fee gains in reaction to last year’s subsidized discounts eased the downward pressure from low-cost monthly data plans introduced in April by major mobile phone carriers and additional discounts offered in recent months.
The key points from the Tokyo CPI data:
- The core consumer price index (excluding fresh food) in the capital’s 23 wards rose 0.3% from a year earlier in November after rising 0.1% in October, which was the first increase in 14 months. It was slightly below the consensus call of a 0.4% rise but marked the highest increase since +0.4% in July 2020.
- The core-core CPI (excluding fresh food and energy) – a key indicator of the underlying trend of inflation – dipped 0.3% for the eighth straight year-on-year decline after falling 0.4% the previous month. This measure does not receive support from a recovery trend in energy prices seen earlier this year.
- The total CPI jumped 0.5% on year in November after rising 0.1% in October and posting its first year-over-year gain in 12 months in September (+0.3%). It was the fastest pace of increase since +0.6% in July 2020. Fresh food prices, a volatile factor, rose 4.8% on year this month, pushing up the overall index by 0.18 percentage point, compared to a 0.2% rise and a positive 0.01-point contribution the previous month.
- Energy prices rose 13.9% on year in November, pushing up the total index by 0.62 percentage point (vs. +9.1%, +0.41 point the previous month). The pace of increase in gasoline prices also accelerated to +28.2% y/y (+0.14 percentage point contribution) from +22.3% (+0.11 point) in October. Electricity charges showed another month of a large increase, up 13.1% (+0.32 point contribution) after +9.3% (+0.23 point) the previous month. City gas prices also picked up the pace y/y increase to +10.3% (+0.14 points) from +4.2% (+0.06 point).
- Food excluding perishables rose 0.8% (+0.16 point contribution) in November after rising 0.3% (+0.06 point) in October as the prices for dairy products, bread, coffee, cooking oil among other products have been raised in line with surging costs for energy, commodities and transportation.
- By contrast, household durable goods prices now showed a 1.9% drop from a year earlier in November after months of increase, pushing down the CPI by 0.02 percentage point, after rising 2.1% and adding 0.02 point to the index in October. Initial strong demand for electric appliances and furniture needed for stay-home lifestyles appears to have run its course.
- Accommodations maintained a high pace of increase, up 57.6% y/y (+0.42 point contribution) in November vs. +59.1% (+0.43 point) in October, in reaction to subsidized discounts seen a year earlier. The government suspended its controversial ‘Go To Travel’ campaign in late December after seeing a spike in coronavirus cases. The program was launched in July 2020 to subsize hefty discounts on hotel fees and domestic transportation costs.
- The downward pressure continued to come from lower mobile communications fees, which slumped 53.6% on year and trimmed the total CPI by 1.13 percentage points in November, compared to a 53.6% drop (-1.12 point) in September.
Rising Cost of Living Vs. Slow Wage Recovery
Higher energy and processed food prices amid reopening global demand and supply constraints could reduce the average Japanese household’s disposable income if the growth in real wages remains stagnant.
The average price of regular gasoline in Japan this week eased to Y168.7 ($1.46) a liter from Y168.9 last week for the second straight weekly fall, data from the Agency for Natural Resources and Energy released Thursday showed, but it remained elevated after hitting an over seven-year high of Y168.7 on Nov. 1 and rising further to Y169.0 on Nov. 8.
The Y169.0 price was the highest level since Y169.0 seen on Aug. 18, 2014 and was 27.2% above the year-earlier level of Y132.9. However, it was still well below the record of Y185.1 hit on Aug. 4, 2008.
The pickup in nominal wages has continued at a snail’s pace in Japan but real wages slumped on higher prices for daily necessities, data released earlier this month by the Ministry of Health, Labour and Welfare showed.
Total monthly average cash earnings per regular employee in Japan edged up 0.2% on year in September after rising 0.6% in August and July. It was the seventh straight year-on-year gain, recovering gradually from a pandemic-triggered slump in 2020, when nominal wages dipped 1.2% vs. -0.4% in 2019.
In real terms, average wages fell 0.6% in September after rising a revised 0.1% in August, marking the first year-on-year drop in three months.
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Contact this reporter: max@macenews.com
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