–Both Core and Total CPI Measures Mark 6th Straight Y/Y Gains
–Utilities Continue Pushing Up Energy; Durable Goods on Downtrend
–Hotel Fees Pick Up in February After Base Effects Fade in January
–CPI Could Come Under Pressure Again If Govt Resumes Travel Subsidies
By Max Sato
(MaceNews) – Core and total consumer prices in Japan posted the sixth straight year-on-year rise in February on energy and food, returning to the recent gradual pickup path after slowing in January on fading base effects of a spike in hotel fees in 2021 over subsidized discounts in 2020, data from the Ministry of Internal Affairs and Communication released Friday showed.
Utilities and processed food price rises continued to accelerate while waning stay-at-home demand for furniture and appliances has become clearer. The CPI remains under downward pressure from low-cost monthly data plans introduced in April 2021 by major mobile phone carriers and additional cheaper plans for low data usage offered later.
The Bank of Japan board expects core consumer inflation to rise 1.1% in both fiscal years 2022 and 2023, up from an estimated zero growth in fiscal 2021 ending in this month, but well below the bank’s 2% target. The board will update its projections in the quarterly Outlook Report due April 28.
The key points from CPI data:
* The underlying inflation rate – measured by the core-core CPI (excluding fresh food and energy) – marked the 11th straight drop, down 1.0% on year after slumping 1.1% in January. This narrow measure is not receiving support from higher energy prices.
* The total CPI gained 0.9% on year in February for the sixth consecutive year-on-year increase, also as expected, after rising 0.5% in January and 0.8% in December. September’s 0.2% gain was the first increase in 13 months. Fresh food prices, a volatile factor, jumped 10.1% on year and pushed up the overall index by 0.39 percentage point after rising 6.5% (up 0.26 point) the previous month.
* Among key components of the CPI basket of goods and services, energy continued to rise at a high pace, up 20.5% on year (+1.41 percentage point contribution) in February vs. +17.9% (+1.23 points) in January. The markup in electricity continued accelerating, up 19.7% (+0.63 point) vs. +15.9% (+0.51 point) while the increase in gasoline remained high at 22.2% (+0.42 point) vs. +22.0% (+0.40 point). Food excluding perishables was up 1.6% (+0.35 point) vs. +1.3 (+0.28 point). Rising materials and energy costs are forcing fast food chains to raise the prices for beef bowls among other items.
* Most of the downward base effects of government-led discounts on telecom costs remain at least until the end of March 2022. Mobile communications fees plunged 53.6% on year (-1.48 percentage points) in February after slumping 53.6% (-1.47 percentage points) in January.
* Household durable goods prices posted the fourth straight year-on-year drop in February, down 3.4% and trimming the index by 0.05 percentage point after falling 3.1% (a negative 0.04 point contribution) the previous month. The initial demand for electric appliances (refrigerators, etc.) and furniture arising from the stay-at-home lifestyle has waned.
* The year-on-year increase in accommodations costs picked up to 6.0% (+0.05 point contribution) in February after shrinking to 0.6% (+0.01 point) in January from 44.0% (+0.29 point) in December. Double-digit percentage gains were seen in the second half of 2021 in reaction to sharp drops seen a year before.
* The CPI could come under downward pressure again from accommodations.
The government is considering reopening its controversial ‘Go To Travel’ campaign to support the tourism industry after suspending it in late December 2020 amid criticism that it was causing a spike in coronavirus cases. The program was launched in July 2020 to subsidized hefty discounts on hotels and transportation costs.