–Core CPI +2.1% Y/Y Largest in Over 13 Years If 2014 Sales Tax Hike Impact Excluded
–Total CPI +2.5% Y/Y Largest in Over 30 Years Excluding Impact of 2014, 1997 Sales Tax Hikes
–Energy Costs High but Easing; Household Durable Goods Prices Post 1st Y/Y Rise in 6 Months
By Max Sato
(MaceNews) – Consumer prices in Japan surged from a year earlier in April in what is deemed as a temporary jump to around the Bank of Japan’s 2% inflation target, as the base effects of sharp mobile phone user fee discounts from April 2021 have waned and food and energy costs continued climbing amid protracted supply constraints and global reopening demand, data from the Ministry of Internal Affairs and Communication released Friday showed.
The upward pressure from fresh and processed food prices continued accelerating in April in line with rising commodities markets while the impact of high energy costs, still the largest contributor to the CPI, has eased as the government has been trying to cap retail gasoline price markups by providing subsidies to refineries. Supply bottlenecks pushed up the prices for household durable goods (refrigerators, etc.) after recent drops.
Much of the downward pressure from low-cost monthly data plans introduced in April 2021 by major mobile phone carriers and expanded later has faded. BOJ policymakers believe inflation is unlikely to be anchored around the bank’s 2% target any time soon due to slow wage growth and weak service prices.
The key points from CPI data:
- The national average core consumer price index (excluding fresh food) soared 2.1% from a year earlier in April in line with the median economist forecast for a 2.1% rise. It was the eighth straight year-on-year increase after rising 0.8% in March. September’s 0.1% rise was the first increase in 18 months.
- The 2.1% jump was the largest increase since the 2.2% rise in March 2015, but excluding the direct impact of the April 2014 sales tax hike on the March 2015 CPI data (about 2 percentage points), it was the sharpest gain since the 2.3% rise seen in September 2008.
- The underlying inflation rate – measured by the core-core CPI (excluding fresh food and energy) – rose 0.8% on year in April after falling 0.7% in March, marking the first rise in 21 months since the 0.4% rise in 2020 and the largest gain since January 2020, when the index also rose 0.8%. This narrow measure is not receiving support from higher energy markets but is now being propped up by wide-spread markups in various items.
- The total CPI surged 2.5% on year in April, marking the eighth consecutive year-on-year increase after rising 1.2% in March. It was in line with the median economist forecast of a 2.5% jump. September’s 0.2% gain was the first increase in 13 months. Fresh food prices, a volatile factor, rose 12.2% on year and pushed up the overall index by 0.46 percentage point after rising 11.6% (up 0.44 point) the previous month.
- The 2.5% increase was the largest increase since the 2.9% rise in October 2014, but excluding the direct impact of the sales tax hikes in April 2014 (from 5% to 8%) and April 1997 (from 3% to 5%), it was the fastest pace of inflation since the 2.7% surge in December 1991, just after the burst of the asset bubble. Later the sales tax was raised to the current 10% from 8% in October 2019 but its impact was smaller than in the past.
- Among key components of the CPI basket of goods and services, energy continued to rise at a high pace, up 19.1% on year (+1.38 percentage point contribution) in April vs. +20.8% (+1.46 points) in March. The markup in electricity bills eased slightly after having accelerated in recent months, up 21.0% (+0.69 point) vs. +21.6% (+0.70 point). The increase in gasoline prices remained high at 15.7% (+0.32 point), but its pace continued decelerating from +19.4% (+0.38 point) the previous month, partly due to effects of government subsidies to refineries aimed at keeping retail fuel prices from surging further before upper house elections in July.
- Food excluding perishables was up 2.6% (+0.58 point), with the pace of increase accelerating further from +2.0% (+0.44 point).
- Mobile communications fees dipped 22.5% on year (a negative contribution of 0.38 percentage points) in April, but the decline was much smaller than the 52.7% fall (-1.42 points) in March.
- Household durable goods prices posted the first year-on-year rise in six months in April, rising 5.0% and pushing up the total CPI by 0.07 point, after falling 0.4% and trimming the index by 0.01 percentage point. Demand for electric appliances (refrigerators, etc.) and furniture arising from the stay-at-home lifestyle had waned earlier but tight supply is pushing up the prices.
- The year-on-year increase in accommodations costs gained 5.1% (+0.06 point contribution) in April after rising 5.6% (+0.05%) in March. Bookings for domestic leisure travel have been gradually picking up since the government eased Covid restrictions in late March. Double-digit percentage gains seen in the second half of calendar 2021 including the 44.0% rise in December (+2.29 point) were in reaction to sharp drops seen a year before.
- The CPI could come under downward pressure again from accommodations if the government decides to reopen its controversial ‘Go To Travel’ campaign to support the tourism industry and promote consumer spending by subsidizing hefty discounts on hotels and transportation costs. The program was suspended in late December 2020 amid a spike in coronavirus cases five months after it was launched.
Contact this reporter: max@macenews.com
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