— Total CPI Marks 1st Y/Y Rise in 10 Months on Energy, Processed Food
— Mobile Phone Fee Discounts in April Remain A Damper on CPI for Now
By Max Sato
(MaceNews) – Japan’s core consumer prices continued showing a modest gain in June in light of recovering overall energy costs, although gasoline prices posted a slower double-digit percentage increase from a year earlier, data from the Ministry of Internal Affairs and Communication released Tuesday showed.
Higher prices for processed food and property insurance premiums also supported the snail-paced pickup in inflation, mitigating the impact of the move in April by major mobile phone carriers to slash user fees at the request of the government.
In its latest quarterly Outlook Report issued Friday, the Bank of Japan board revised up its median forecast for the core CPI (excluding perishables) in fiscal 2021 ending next March to +0.6% from +0.1% projected in April on the conviction that a sharp year-on-year rise in gasoline prices would offset the drag from large discounts in mobile phone charges.
The core CPI forecast for fiscal 2022 was revised up slightly to +0.9% from +0.8% in April and the board’s projection for fiscal 2023 remains at +1.0%. BOJ policymakers believe the gradual reopening of the economy should support higher consumer prices amid rising energy markets as the base effect of the April 2021 reduction in mobile charges wanes next spring.
The BOJ is more upbeat about economic growth in the next fiscal year, but it also noted the outlook remained “highly unclear” due to the pandemic, with risks to CPI “skewed to the downside.”
Earlier this month, the government issued a state of emergency for Tokyo for the fourth time since April last year, reinstating its request that bars and restaurants should suspend serving alcohol at any time and close by 8 p.m., effective from July 12 until Aug. 22.
In a bid to contain the spread of the more contagious Delta variant, the government also extended less strict emergency restrictions on three surrounding prefectures – Saitama, Chiba and Kanagawa – through Aug. 22.
The key points from CPI data:
The national average core consumer price index (excluding fresh food) rose 0.2 from a year earlier in June, matching the median economist forecast of a 0.2% rise and following a 0.1% gain in May, which was the first year-on-year increase in 14 months.
The underlying inflation rate — measured by the core-core CPI (excluding fresh food and energy) – marked the third straight y/y drop, down 0.2% after sliding at the same rate in the previous two months. This narrow measure is not receiving support from the recent pickup in energy markets.
Total CPI rose 0.2% on year in June, posting the first y/y increase in 10 months after falling just 0.1% in May. Fresh food prices rose 0.6% on year and pushed up the overall index by 0.02 percentage point after falling 5.2% (-0.23 point) the previous month.
Among other key components of the CPI basket of goods and services: Energy +4.6% y/y (+0.35 percentage point contribution) in June vs. +4.2% (+0.31 point) in May; gasoline +17.9% y/y (+0.34 point) vs. +19.8% (+0.37 point); electricity -1.7% (-0.06 point) vs. -2.9% (-0.10 point); food excluding perishables +0.1% (+0.01 point) vs. unchanged (-0.01 point).
The base effect remains until March next year: mobile communications fees
-27.9% y/y (-0.57 percentage point) in June vs. -27.9% y/y (-0.57 percentage point) in May.
The year-on-year increase in household durable goods prices continued to show a slower pace of increase: +1.7% y/y (+0.02 point contribution) in June vs. +2.3% (+0.02 point contribution) in May, +3.0% (+0.03 point) in April. Demand for electric appliances and furniture was stronger earlier as more people adopted stay-home lifestyles.
The impact of modest gains in some traveling costs was neutral to total CPI. Accommodations +0.9% y/y (+0.01 point) in June vs. +0.9% (+0.01 point). The government’s panel of health experts is urging people to avoid visiting other prefectures and watch the Tokyo Olympics at home. The games will take place from July 23 to Aug. 8 (most venues are without spectators), followed by the Paralympics, which will run from Aug. 24 until Sept. 5.
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Contact this reporter: max@macenews.com.
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