–Influx of Asian Visitors During Lunar New Year Holidays Also Boosts Hotel Fees
–January Data Revised Up as New Data Collection Method for Overseas Package Tours Applied
–Total CPI Annual Rate Accelerates to 2.6% from 1.8%
–Core-Core CPI (Ex-Fresh Food, Energy) Y/Y Rise Slows to 3.1% from 3.3%
By Max Sato
(MaceNews) – Consumer inflation in Tokyo, the leading indicator of the national average, accelerated at a slightly faster pace than expected in February, after a sharp deceleration in January, as the base-year effect of utility subsidies has waned and an influx of Asian visitors during their lunar new year holidays boosted hotel fees, offsetting the impact of a slower gain in processed food prices, data from the Ministry of Internal Affairs and Communications released Tuesday showed.
The core CPI (excluding fresh food), the key measure for the Bank of Japan’s policy decision, posted a 2.5% gain on year after marking a 22-month low of a 1.8% rise (revised up from a preliminary 1.6% increase) in January, coming in just above the consensus call of a 2.4% rise and much more stable around the bank’s 2% target, compared to a 41-year high of 4.3% reached in January 2023.
The year-over-year rise in the total CPI picked up to 2.6% from a 22-month low of 1.6% in January, higher than the median forecast of a 2.4% rise. The core-core CPI (excluding fresh food and energy) annual rate moderated slightly to a 12-month low of 3.1% (consensus was 3.0%) after easing to 3.3% (revised up from 3.1%) in January from December’s 3.5% and a 41-year high of 4.0% hit in July 2023.
January figures were revised up after the ministry applied a change in its data collection method for overseas package tours, which was first reflected in the national CPI data for January released last month.
As consumer inflation has stabilized after an earlier spike caused by heightened geopolitical risks and global supply chain disruptions, BOJ policymakers are seeking to unwind large-scale monetary stimulus by confirming clearer signs of sustained wage hikes in fiscal 2024 starting in April. Both Governor Kazuo Ueda and Deputy Governor Shinichi Uchida have said financial conditions will remain accommodative even after the bank’s board decides to lift the negative short-term interest rate, an action expected in March or April at the earliest.
The key points from the Tokyo CPI data:
* The core consumer price index (excluding fresh food) in the capital’s 23 wards rose 2.5% on year in February, above the median economist forecast of a 2.4% rise (forecasts ranged from 2.0% to 2.5% gains). It is the 30th straight year-over-year rise and January’s 1.8% was the slowest since the 0.8% rise in March 2022. The slowdown of the core measure began in February 2023, when it eased sharply to 3.3% from a 41-year high of 4.3% in January 2023 as the effects of government subsidies for electricity and natural gas utilities kicked in.
* The core-core CPI (excluding fresh food and energy) — a key indicator of the underlying trend of inflation — rose 3.1% on the year in February for the 23rd straight rise, after rising 3.3% in January and 3.5% in December. It was above the median forecast of a 3.0% rise (forecasts ranged from 2.8% to 3.3%) but the slowest since the 3.1% rise in February 2023.
* The total CPI rose 2.6% on year in February, marking the 30th straight year-over-year gain and following increases of 1.8% in January, 2.4% in December and 2.7% in November. It was also above the median forecast of a 2.4% rise (forecasts ranged from 2.0% to 2.5% gains). January’s 1.8% increase was the slowest since the 1.3% gain in March 2022. The annual rate fell to 3.4% in February 2023 from a 41-year high of 4.4% the previous month.
* Fresh food prices, a volatile factor, rose 3.5% on year in February, pushing up the overall index by 0.15 percentage point, following an upwardly revised 3.7% rise and a 0.16-point contribution the previous month.
* The acceleration in the February Tokyo CPI annual rate from January stems from a 0.82-point upward drift in overall energy costs, which more than offset a 0.14-point negative gap in processed food prices between the latest and previous months (figures are rounded).
* Energy prices fell 7.9% on year in February, pushing down the total index by 0.43 percentage point, after slumping at a much faster pace of 20.1% (minus 1.26 points) in January. Food excluding perishables rose 5.0 percent on year (a 1.13-point contribution to the total CPI) in February, easing further from a 5.7% rise in January with a 1.27-point contribution. This category replaced energy as the largest positive contributor to the CPI increase in October 2022 (1.27 points vs. 1.20 points).
* In the energy category, gasoline prices rose 4.4% on the year with a positive 0.03-point contribution to the CPI after a 4.1% rise (plus 0.02 point) the previous month. Retail regular gasoline prices hit record highs in early September 2023 as the government scaled back subsides to refineries. The gasoline price in the Tokyo prefecture edged down from mid-January to mid-February, when the ministry collects CPI data for the capital.
* Electricity charges fell 4.9% on the year (minus 0.14 point) after dipping 22.2% (minus 0.76 point) the previous month. The prices for natural gas supplied to homes slid 16.4% (minus 0.32 point) after dipping 24.7% (minus 0.53 point). The government has been providing subsidies for electricity and natural gas since January 2023 (reflected in February bills onward). The program has been extended until April 2024.
* The prices for household durable goods rose 0.7% with a 0.01-point contribution to the CPI in February after rising 0.9% (plus 0.01 point) in January and posting their first year-on-year decrease in 20 months in November, down 1.4% with a negative 0.02-point contribution.
* Accommodations costs rose 33.3% on the year with a positive 0.36-point contribution in February after rising 26.9% (plus 0.29 point) in January and 59.0% (plus 0.53 point) in December. The acceleration from January to February was caused by an influx of visitors from China and other Asian countries during their lunar new year holidays. The recent surge in hotel fees is largely in reaction to a slump that began in late 2022. The government in October that year began subsidizing domestic travel under a new nationwide program, lowering the costs for tourism as part of economic stimulus measures through the first half of 2023 in many regions.
* Downward pressures on the CPI were also partly offset by an upward swing in prices for overseas package tours, which jumped 70.3% on year in February, pushing up the CPI by 0.21 percentage point. In the preliminary January Tokyo CPI data released in late January, this category showed no change but the year-on-year change was revised up sharply to a 62.9% increase (plus 0.20-point contribution) in today’s report due to a change in data collection, first applied to national CPI figures for January.
* Effective last month, the ministry resumed reflecting pricing data collected through its web scraping method for this category, which had been suspended since January 2021. The pandemic prevented many Japanese from traveling freely to other countries for more than three years. After the government widely lifted its Covid public health restrictions in May 2023, the ministry resumed scraping prices for overseas trips packaged by Japanese travel agencies but waited until January 2024 to ensure data collection is smooth.