–Both Core and Total CPI Measures Mark 7th Straight Y/Y Gains
–Utilities Continue Pushing Up Energy; Durable Goods Price Drop Eases
–Most of Base Effects of Sharp Mobile Phone Fee Discounts To Fade in April
–Fiscal 2021 Total, Core Inch Up, Core-Core (Ex-Fresh Food, Energy) Posts 1st Drop in 9 Years
By Max Sato
(MaceNews) – Consumer prices in Japan posted a seventh straight year-on-year rise in March on surging costs for food, utilities and fuels as international energy and commodities markets remain elevated amid the war in Ukraine and lingering global supply constraints, data from the Ministry of Internal Affairs and Communication released Friday showed.
Utilities and processed food price rises continued to accelerate while stay-at-home demand for furniture and appliances has run its course, although household durable goods showed a smaller year-on-year decline last month, compared to the previous three months.
Much of the downward pressure from low-cost monthly data plans introduced in April 2021 by major mobile phone carriers and expanded later will come off in April CPI data due next month, possibly pushing up the annual core inflation rate close to 2%. However, Bank of Japan policymakers believe inflation is unlikely to be anchored around the bank’s 2% target any time soon due to slow wage growth and weak service prices.
The key points from CPI data:
* The underlying inflation rate – measured by the core-core CPI (excluding fresh food and energy) – marked the 12th straight drop, down 0.7% on year, but the pace of decline eased from a 1.0% fall in February. This narrow measure is not receiving support from higher energy markets.
* The total CPI gained 1.2% on year in March, also as expected, marking the seventh consecutive year-on-year increase after rising 0.9% in February. September’s 0.2% gain was the first increase in 13 months. Fresh food prices, a volatile factor, jumped 11.6% on year and pushed up the overall index by 0.44 percentage point after rising 10.1% (up 0.39 point) the previous month.
* In fiscal 2021 that ended in March, the core CPI edged up 0.1% from fiscal 2020, when the key index fell 0.4%, following three years of increase (0.6% in fiscal 2019, 0.8% in fiscal 2018 and 0.7% in fiscal 2017). The downward pressure from mobile phone fee discounts was offset by sharp gains in food, utilities and fuels as well as markups in property insurance premiums and fading effects of subsidized hotel fee discounts in parts of fiscal 2020.
* The total CPI showed a similar pattern, posting the first gain in two years in the last fiscal year, up 0.1%, after dipping 0.2% in fiscal 2020 and following three years of increase (0.5% in fiscal 2019, 0.7% in both fiscal 2018 and 2017).
* The core-core CPI slumped 0.8% in fiscal 2021, the first annual drop in nine years after increases of 0.1% in fiscal 2020 and 0.6% in fiscal 2019. This indicates the current cost-push inflation is coming largely from surging energy and commodities prices.
* Among key components of the CPI basket of goods and services, energy continued to rise at a high pace, up 20.8% on year (+1.46 percentage point contribution) in March vs. +20.5% (+1.41 points) in February. The markup in electricity continued accelerating, up 21.6% (+0.70 point) vs. +19.7% (+0.63 point). The increase in gasoline prices remained high at 19.4% (+0.38 point), but the pace has slowed from +22.2% (+0.42 point) the previous month, partly due to effects of government subsidies to refineries aimed at keeping retail fuel prices from surging further before upper house elections in July. Food excluding perishables was up 2.0% (+0.44 point) vs. +1.6 (+0.35 point).
* March was the last month to see most of the downward base effects of government-led discounts on mobile communications fees, which fell 52.7% on year (a negative contribution of 1.42 percentage points) in March after slumping 53.6% (-1.48 percentage points) in February.
* Household durable goods prices posted the fifth straight year-on-year drop in March, down 0.4% and trimming the index by 0.01 percentage point, but the pace of decline eased from a 3.4% drop (a negative 0.05-point contribution) the previous month. The initial demand for electric appliances (refrigerators, etc.) and furniture arising from the stay-at-home lifestyle has waned.
* The year-on-year increase in accommodations costs gained 5.6% (+0.05 point contribution) in March after rising 6.0% (+0.05 point), 0.6% (+0.01 point) in January and surging 44.0% (+0.29 point) in December. Double-digit percentage gains were seen in the second half of calendar 2021 in reaction to sharp drops seen a year before.
* The CPI could come under downward pressure again from accommodations if the government decides to reopen its controversial ‘Go To Travel’ campaign to support the tourism industry and promote consumer spending by subsidizing hefty discounts on hotels and transportation costs. The program was suspended in late December 2020 amid a spike in coronavirus cases five months after it was launched.