–Core CPI Rise Slower Due to Further Slowdown in Processed Food Markups, Smaller Hotel Fee Gain
–Total CPI Annual Rate Picks Up to 2.6% from Downwardly Revised 2.5%
–Core-Core CPI (Ex-Fresh Food, Energy) Y/Y Rise Slows to 15-Month Low of 2.9%
By Max Sato
(MaceNews) – Consumer inflation in Tokyo, the leading indicator of the national average, decelerated slightly in March in the core measure after accelerating sharply in February, when the waning base-year effect of utility subsidies led to a much smaller fall in energy prices, data from the Ministry of Internal Affairs and Communications released Friday showed.
The core CPI (excluding fresh food), closely watched by the Bank of Japan, posted a 2.4% gain on year, as expected, after climbing to 2.5% in February from 1.8% in January. It was due to a further slowdown in processed food price markups and a
smaller hotel fee gain, which offset the effect of a smaller drop in energy costs.
The year-over-year rise in the total CPI edged up to 2.6% (consensus was 2.5%) after rising to 2.5% (revised down from 2.6%) from January’s 1.8%. The core-core CPI (excluding fresh food and energy) annual rate moderated further to a 15-month low of 2.9% from 3.1%, in line with consensus forecast.
Services costs lifted overall prices higher as firms have been raising wages at a faster pace to secure qualified workers amid widespread labor shortages while processed food prices were elevated after recent slowdown.
The prices of services excluding owners’ equivalent rent gained 2.9% on the year in March, adding 1.01 points to the Tokyo CPI, following a 3.1% rise (plus 1.08 points) in February. The recent uptrend in services costs reflects moves among many firms to raise wages to secure workers. After a recent slowdown, the annual rate of goods prices excluding fresh food rose 3.0% (plus 1.24 points) decelerating only slightly from a 3.1% rise (plus 1.27 points) the previous month.
The key points from the Tokyo CPI data:
* The core consumer price index (excluding fresh food) in the capital’s 23 wards rose 2.4% on year in March in line with the median economist forecast of a 2.4% rise (forecasts ranged from 2.3% to 2.5% gains). It is the 31st straight year-over-year rise after rising 2.5% in February and 1.8% in January, which was the slowest increase 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 2.9% on the year in March for the 24th straight rise, after rising 3.1% in February and 3.3% in January. It was also in line with the median forecast of a 2.9% rise (forecasts ranged from 2.8% to 3.0%) and the slowest since the 2.7% rise in December 2022.
* The total CPI rose 2.6% on year in March, marking the 31st straight year-over-year gain and following increases of 2.5% in February and 1.8% in January. It was just above the median forecast of a 2.5% rise (forecasts ranged from 2.4% to 2.7% 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 6.5% on year in March, pushing up the overall index by 0.27 percentage point, following a 3.1% rise and a 0.11-point contribution the previous month.
* Food excluding perishables rose 4.6 percent on year (a 1.05-point contribution to the total CPI) in March, easing further from a 5.0% rise in February with a 1.13-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).
* Energy prices fell 5.3% on year in March, pushing down the total index by 0.28 percentage point, after dipping 7.9% (minus 0.43 points) in February and 20.1% (minus 1.26 points) in January.
* In the energy category, gasoline prices rose 4.6% on the year with a positive 0.03-point contribution to the CPI after a 4.4% rise (plus 0.03 point) the previous month. Retail regular gasoline prices hit record highs in early September 2023 as the government scaled back subsides to refineries.
* Electricity charges fell 3.0% on the year (minus 0.08 point) after slipping 4.9% (minus 0.14 point) the previous month. The prices for natural gas supplied to homes slid 12.0% (minus 0.23 point) after dipping 16.4% (minus 0.32 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 fell 1.1% with a negative 0.01-point contribution to the CPI in March after rising 0.7% (plus 0.01 point) in February.
* Accommodations costs rose 27.7% on the year with a positive 0.31-point contribution in March after rising 33.3% (plus 0.36 point) in February and 26.9% (plus 0.29 point) in January. 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.