— Both Core and Total CPI Measures Mark 4th Straight Y/Y Gains
— Utilities Push Up Overall Energy Costs, Offsetting Recent Pullback in Gasoline
— Japan 2021 CPI Down 0.2%, 2nd Straight Annual Drop After -0.2% in 2020
By Max Sato
(MaceNews) – Rising utilities and processed food costs propped up consumer prices in Japan in December despite softer gasoline prices, but the year-on-year increase in the core reading lost some steam on fading stay-at-home demand for furniture and appliances and slower markups in accommodations, data from the Ministry of Internal Affairs and Communication released Friday showed.
The base effect of higher property insurance premiums as well as double-digit hotel fee gains in reaction to last year’s subsidized discounts eased the 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.
Consumer inflation is expected to reach the halfway point of the Bank of Japan’s 2% target sometime in coming months, although higher costs of daily necessities could hurt lower income households and become a political focus before upper house elections taking place later this year (probably in the summer).
The median core CPI forecast by the Bank of Japan’s nine-member board for fiscal 2022 starting in April has been revised up to a 1.1% rise in its quarterly Outlook Report released Tuesday from a 0.9% increase projected in October. The board has also revised up its forecast for fiscal 2022 inflation to 1.1% from 1.0% earlier. The fiscal 2021 core CPI projection remains at zero.
The key points from CPI data:
- The national average core consumer price index (excluding fresh food) rose 0.5% from a year earlier in December, coming in softer than the consensus call of a 0.6% rise. It was the fourth straight year-on-year increase after rising 0.5% in November and edging up 0.1% in October. September’s 0.1% rise was the first in 18 months.
- For the whole of 2021, the core CPI posted the second straight annual decline, down 0.2% from 2020, when the index dipped at the same pace, following a 0.6% rise in 2019.
- The underlying inflation rate – measured by the core-core CPI (excluding fresh food and energy) – marked the ninth straight drop, down 0.7% on year, after falling 0.6% in November and 0.7% in October. This narrow measure is not receiving support from higher energy markets.
- The total CPI jumped 0.8% on year in December for the fourth consecutive year-on-year increase after rising 0.6% in November and 0.1% in October. September’s 0.2% gain was the first increase in 13 months. Volatile fresh food prices surged 8.0% on year and pushed up the overall index by 0.30 percentage point after rising 3.1% (+0.12 point) the previous month.
- Among key components of the CPI basket of goods and services: Energy surged 16.4% on year (+1.12 percentage point contribution) in December vs. +15.6% (+1.07 points) in November; gasoline rose but at a slower pace of +22.4% (+0.40 point) vs. +27.1% (+0.48 point); electricity +13.4% (+0.43 point) vs. +10.7% (+0.35 point); food excluding perishables +1.1% (+0.25 point) vs. +1.1 (+0.25 point).
- Most of the downward base effects remain at least until the end of March 2022. Mobile communications fees plunged 53.6% on year (-1.48 percentage points) in December after slumping 53.6% (-1.48 percentage points) in November.
- Household durable goods prices posted the second straight year-on-year drop in December, down 2.9% and pushing down the index by 0.04 point after falling 0.3% (zero contribution) in November. Demand for electric appliances and furniture has peaked after households have purchased necessary items for working from home.
- Accommodations continued to show a sharp increase from a year earlier, up 44.0% (+0.29 point contribution) in December, but the pace slowed from 57.6% (+0.34 point) in November, leading to a slower year-on-year rise in the core CPI.
- The government’s “Go To Travel” program launched in late July 2020 to subsidize hefty discounts on hotel stays and transportation costs has been suspended since late December 2020 after wide-spread criticism that the program had triggered a spike in coronavirus infections.
Contact this reporter: max@macenews.com
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