–Core CPI Rise Limited by Modest Processed Food Markups, Smaller Hotel Fee Gain??
–Total CPI Annual Rate Rises to 2.2% from 3-Month Low of 1.8%
–Core-Core CPI (Ex-Fresh Food, Energy) Y/Y Rise Slows to 20-Month Low of 1.7%
By Max Sato
(MaceNews) – Consumer inflation in Tokyo, the leading indicator of the national average, picked up in May in two of the three key measures on higher utility costs due to reduced subsidies that are ending this month and amid the weak yen that is pushing up import 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 1.9% increase on year, in line with the median forecast of 1.9%, after decelerating sharply to a 25-month low of 1.6% in April from 2.4% in March as completely free high school education took effect in the metropolitan area and gains in processed food and hotel fees continued easing.
The year-over-year rise in the total CPI accelerated to 2.2 percent (consensus was 2.1%) from a three-month low of 1.8%. The core-core CPI (excluding fresh food and energy) annual rate eased further to a 20-month low of 1.7% from 1.8% in line with the median forecast of a 1.7% rise.
Services costs have led overall inflation until recently as firms raise wages at a faster pace to secure qualified workers amid widespread labor shortages. However, the plunge in education costs have pushed down services inflation, starting in April.
The prices of services excluding owners’ equivalent rent gained 0.7 percent on year in May, contributing 0.26 point to the Tokyo CPI, following a 1.0 percent rise (adding 0.36 point) in April. The annual rate of goods prices excluding fresh food accelerated to 3.6 percent (adding 1.48 points) from 2.5 percent (adding 1.06 points) the previous month.
Other details from the Tokyo CPI data:
* 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.
* Fresh food prices, a volatile factor, rose 9.1% on year in May, pushing up the overall index by 0.38 percentage point, following a 8.2% rise and a 0.34-point contribution the previous month. Too much rain and not enough sunshine in April led to poor crops, pushing up the prices for cabbage by 84.1% from a year earlier.
* Food excluding perishables rose 3.2 percent on year (a 0.73-point contribution to the total CPI) in May, after rising 3.2% in April (plus 0.72 point). 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 rose 5.9% on year in May, pushing up the total index by 0.29 percentage point, after dipping 2.9% in April (minus 0.15 point), 5.3% (minus 0.28 point) in March, 7.9% (minus 0.43 point) in February and 20.1% (minus 1.26 points) in January.
* In the energy category, gasoline prices rose 4.1% on the year with a positive 0.02-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 rose 13.1% on the year (plus 0.33 point) after slipping 2.1% (minus 0.06 point) the previous month. The prices for natural gas supplied to homes slid 3.9% (minus 0.07 point) after dipping 7.0% (minus 0.13 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 then end of May 2024.
* The prices for household durable goods rose 4.1% with a positive 0.05-point contribution to the CPI in May after falling 3.8% (minus 0.05 point) in April and
rising 1.1% (plus 0.01 point) in March.
* Accommodations costs rose 14.7% on the year with a positive 0.19-point contribution in May, easing further from increases of 18.8% (plus 0.23 point) in April, 27.7% (plus 0.31 point) in March and 33.3% (plus 0.36 point) in February. The surge in hotel fees seen late last year 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.