— Total CPI Y/Y Gain Hits 2-Year High on Sharply Higher Fresh Food Prices
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 further to a nearly two-year high in December amid rising utility costs and higher prices of entertainment durable goods, although gains in fuels, processed food and hotels slowed, data from the Ministry of Internal Affairs and Communications released Friday showed.
The base effect of higher property insurance premiums as well as double-digit percentage hotel fee gains (albeit smaller than before) 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 0.5% from a year earlier in December, as expected, after rising 0.3% in November. It was the highest increase since +0.5% in February 2020. For the whole of 2021, the core CPI posted the first drop in five years, falling 0.2% from 2020, when it was flat.
* The core-core CPI (excluding fresh food and energy) – a key indicator of the underlying trend of inflation – dipped 0.3% for the ninth 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. It dipped 0.3% in 2021, marking the first fall in eight years after a 0.2% gain in 2020.
* The total CPI jumped 0.8% on year in December, marking the fourth straight year-on-year gain after rising 0.5% in November. It was the fastest pace of increase since +1.0% in December 2019. Fresh food prices, a volatile factor, surged 9.8% on year this month, pushing up the overall index by 0.35 percentage point, compared to a 4.8% rise and a positive 0.18-point contribution the previous month. In 2021, total CPI slipped 0.2% for the first drop in five years after rising 0.1% in 2020.
* Energy prices rose 16.9% on year in December, pushing up the total index by 0.74 percentage point (vs. +13.9%, +0.62 point the previous month). The pace of increase in gasoline prices now decelerated to +22.7% y/y (+0.11 percentage point contribution) from +28.2% (+0.14 point) in November. By contrast, electricity charges picked up the pace of increase, up 16.3% (+0.40 point contribution) after +13.1% (+0.32 point) the previous month. City gas prices also rose faster at +15.9% (+0.22 points) from +10.3% (+0.14 point).
* Food excluding perishables rose 0.7% (+0.15 point contribution) in December after rising 0.8% (+0.16 point) in November. The pace of increase decelerated slightly after widespread markups earlier.
* By contrast, household durable goods prices fell 0.9% from a year earlier in December, pushing down the CPI by 0.01 percentage point. It followed a sharper 1.9% drop in November (-0.02 point contribution) after months of increase.
Initial strong demand for electric appliances and furniture needed for stay-at-home lifestyles has waned as more people have resumed commuting to work despite the lingering pandemic.
* The year-on-year increase in accommodations costs slowed to +44.0% on year (+0.35 point contribution) in December from +57.6% (+0.42 point) in November but it was still much higher than a year earlier, when hotel fees were heavily subsidized. The government suspended its controversial ‘Go To Travel’ campaign in late December 2020 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 (-1.13 point) the previous month.