— Gasoline Markup Slows While Electricity Bills Now Up on Year
— Air Conditioners, Property Insurance Premiums Also Support Prices
By Max Sato
(MaceNews) – The core reading of consumer prices in Tokyo, a leading indicator of the national average, was unchanged from a year earlier in August, firming after a year-long decline, thanks to higher energy costs and an uptick in hotel fees, data from the Ministry of Internal Affairs and Communications released Friday showed.
Stay-home lifestyles during the pandemic and Japan’s long and humid summer supported demand for air conditioners and other household durable goods, leading to higher prices. This, combined with the base effect of higher property insurance premiums and supplementary education tuitions, eased the downward pressure from large discounts in mobile communications fees introduced in April.
Global growth and Japanese inflation prospects have been clouded by yet another spike in coronavirus cases triggered by the more contagious Delta variant, and possibly by eased restrictions on social-distancing and face-covering requirements in some economies.
The number of coronavirus infections is also surging in Japan, prompting the government to continue expanding the areas under the state of emergency and extending its period. Less restrictive emergency measures have been also applied to more regions. A total of 33 prefectures are under certain COVID-19 restrictions, about 70% of the total 47 prefectures.
The key points from the Tokyo CPI data:
* The core consumer price index (excluding fresh food) in the capital’s 23 wards was unchanged from a year earlier in August after falling 0.3% in July (revised down from +0.1%), which was a 12th straight y/y decrease. It was firmer than the median economist forecast for a 0.2% drop.
* The government has shifted the base year to 2020 from 2015 and updated the CPI basket of goods and services in a routine move to correct the statistics’ upward bias and reflect the latest lifestyles. This resulted in downward revisions to CPI’s all major categories for recent months.
* The core-core CPI (excluding fresh food and energy) – a key indicator of the underlying trend of inflation – dipped just 0.1% on year for the fifth straight y/y decline after falling a revised 0.4% in July (flat under the previous formula).
This measure does not receive support from a recovery trend in energy prices seen earlier this year.
* The total CPI fell 0.4% on year in August after slipping at the same pace in July (revised down from -0.1%), marking an 11th consecutive month of y/y decrease. Fresh food prices, a volatile factor, plunged 9.9% y/y in August, pushing down the overall index by 0.41 percentage point, compared to a 2.8% drop and a negative 0.11-point contribution the previous month.
* Energy prices rose 0.9% on year in August, pushing up the total index by 0.04 percentage point (vs. +0.7%, +0.03 point the previous month, which was the first rise in about two years). The pace of increase in gasoline prices decelerated to +17.8% y/y (+0.09 percentage point contribution) in August from +20.2% (+0.10 point) in July. Electricity charges now showed a year-on-year gain, +0.4% (+0.01 point) vs. -0.8% (-0.02 point) the previous month.
* Among other gainers, household durable goods, such as air conditioners, continued rising on year, up 10.5% (a positive 0.11-point contribution) in August vs. +8.4% (+0.09 point) the previous month. Demand for electric appliances and furniture remains generally strong in stay-home lifestyles during the pandemic.
* Food excluding perishables was flat in August after recent drops (-0.3%, -0.06 point in July)
* Accommodations surged 46.6% y/y (+0.41 point contribution) in August vs. +17.3% (+0.18 point contribution) in July, 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 new coronavirus cases. The controversial program was launched in July 2020 to subsize hefty discounts on hotel fees and domestic transportation costs, and was aimed at shoring up the hard-hit tourism industry.
* The downward pressure continued to come from lower mobile communications fees, which slumped 44.8% on year and trimmed the total CPI by 0.93 percentage point in August, compared to a 39.6% drop (-0.83 point) in July. The downward pressure is heightened under the new formula as mobile communications fees have a higher weighting in the CPI basket of goods and services.