– Weak Energy Still Key Factor Behind Year-on-Year CPI Decline
– Government Has Suspended Travel Discounts but Hotels Cut Prices Amid Slump
By Max Sato
(MaceNews) – Consumer prices in Tokyo, a leading indicator of the national average, were little changed in February from January, leading to a smaller year-on-year drop in key measures as the recent downtrend in food and energy costs had eased, data from the Ministry of Internal Affairs and Communications released Friday showed.
Most of the key CPI measures were still below year-earlier levels in February, mainly due to lower utilities charges and gasoline prices, although energy prices edged up on month, reflecting a recent pickup in international markets. The base-year effect of government subsidies for private university tuitions that began last April continued.
The year-on-year drop in accommodations costs widened slightly in February after having eased in the past few months, when people shied away from using government-subsidized hefty discounts on domestic travel costs. Hotels cut prices this month to lure customers amid slumping demand.
The government suspended the controversial ‘Go To Travel’ campaign, effective on Dec. 28, after seeing a spike in new coronavirus cases. Prime Minister Yoshihide Suga has extended a state of emergency in Tokyo and some other areas for another month until early March, but Japan hasn’t imposed a strict lockdown on any cities during the pandemic.
The key points from the CPI data:
* The core consumer price index (excluding fresh food) in the capital’s 23 wards fell 0.3% on year in February, after dipping 0.5% (revised from -0.4%) in January and slumping 0.9% in December. The latest figure came in slightly firmer than the median economist forecast of a 0.4% drop. It was the seventh straight month of year-on-year decline amid weak energy prices.
* The core-core CPI (excluding fresh food and energy) – a key indicator of the underlying trend of inflation – rose 0.2% on year in February, marking the second consecutive y/y gain after rising at the same pace in January.
* The total CPI fell 0.3% this month after slipping 0.5% in January and plunging 1.2% in December. The recent slump in fresh food prices continued easing. They were neutral to the total index this month, after pushing it down by 0.08 point in January.
* The biggest factor behind the sharper declines in both the total and core readings remained energy costs (particularly electricity and city gas), which have been sliding from year-earlier levels. Energy prices fell 9.8%, lowering the total index by 0.51 percentage point (vs. -10.9%, -0.58 point the previous month).
* Processed food -0.1% y/y in February (a negative 0.03-percentage-point contribution) vs. -0.2% (-0.05 point) in January.
* Accommodations -5.1% y/y (a negative 0.08-point contribution) in February vs. -2.1% (-0.03 point) in January.
* On the upside, household durable goods +4.0% y/y (a positive 0.04-point contribution) in February vs. +3.2% (+0.03-point) in January. Demand for electric appliances and furniture remains strong in stay-home lifestyles during the pandemic. The decline in overseas tour prices eased to -0.8% y/y (-0.01-point contribution) in February from -5.3% (-0.05 point) in January in reaction to a sharper drop in prices for departures to Asia in February last year during the first wave of the pandemic.