— Recovering Gasoline Prices Easing Overall Price Fall
By Max Sato
(MaceNews) – Consumer prices in Tokyo, a leading indicator of the national average, continued posting a slight year-on-year drop in the core reading in May as the effect of firmer energy costs was more than offset by the downward pressure from lower mobile communications fees, data from the Ministry of Internal Affairs and Communications released Friday showed.
All of the three key CPI measures were slightly below year-earlier levels this month, mainly due to lingering weakness in some food prices and utility costs. Gasoline prices have been rising on the recent pickup in global demand while property insurance premiums are above last year’s levels.
The key points from the CPI data:
* The core consumer price index (excluding fresh food) in the capital’s 23 wards dipped 0.2% on year in May for the 10th straight month of year-on-year decline, after slipping 0.2% in April and improving from a 0.9% slump in December. The median economist forecast was also -0.2%.
* The core-core CPI (excluding fresh food and energy) – a key indicator of the underlying trend of inflation – fell 0.1% on year in May, posting the first y/y drop in five months after being unchanged the previous month. This measure does not receive support from recovering gasoline prices.
* The total CPI fell 0.4% on year this month after slumping 0.6% in April. Fresh food prices dropped 5.1% y/y, pushing down the overall index by 0.22 percentage point in May. The dampening effect of fresh food prices eased from an 8.0% plunge and a negative 0.35-point contribution in April.
* The biggest factor behind the year-on-year decline in the core and total CPI was lower mobile communications fees, which fell 27.9% on year and trimmed the total CPI by 0.44 percentage point in April, compared to a 26.5% drop (-0.41 point) in April. Major mobile phone carriers slashed monthly communications fees for various plans in April in response to a persistent government request.
* The impact of lower energy costs, particularly from utilities, continued to ease. Energy prices slipped 1.3% on year, lowering the total index by 0.07 percentage point (vs. -4.7%, -0.24 point the previous month). The y/y increase in gasoline prices accelerated to +19.3% y/y (+0.12 percentage point contribution) this month from +13.1% (+0.08 point) last month.
* Food excluding perishables were now below year-earlier levels, down 0.2% in May (-0.04 percentage point) vs. unchanged (+0.00 point) in April.
* Accommodations +0.9% y/y (+0.01 point contribution) in April vs. +3.1 (+0.04 point contribution) in April. The government suspended its controversial ‘Go To Travel’ campaign, effective on Dec. 28, after seeing a spike in new coronavirus cases. The program was launched in July to subsize hefty discounts on hotel fees and domestic transportation costs, and was aimed at shoring up the hard-hit tourism industry. In the face of a fourth wave of COVID-19 infections, Japan is unlikely to resume the program any time soon.
* Among gainers, household durable goods, such as air conditioners during Japan’s long humid summer, continued rising on year but at a slower pace of +
4.7% y/y (a positive 0.05-point contribution) in May vs. +7.2% (+0.07 point) in April. Demand for electric appliances and furniture remains generally strong in stay-home lifestyles during the pandemic.
Govt Downgrades Economic View on Weak Consumption
Japan’s government Wednesday downgraded its view on the domestic economy for the first time in three months, saying the weakness in some spots is more pronounced while the economy stays on course toward a recovery from last year’s pandemic-caused slump, according to its monthly report released by the Cabinet Office.
As expected, the government downgraded its view on consumer spending for the first time in three months, noting it “has been in a weak tone, particularly in the service sector.” By adding the latter part, it emphasized the continued challenge for the tourism industry, with hotel occupancies still on a downtrend.
In contrast, spending on goods has been solid. For example, new car sales had rebounded close to the 2016-2018 monthly average by last October and have largely stayed at that level even during the fourth wave of the pandemic in Japan.
In response to a resurgence in coronavirus infections, the government has tightened restrictions on economic activity in a state of emergency for 10 prefectures, ranging from Tokyo in the east and Osaka in the west to Hokkaido in the north and Okinawa in the southwestern tip of Japan.
—
Contact this reporter: max@macenews.com
Content may appear first or exclusively on the Mace News premium service. For real-time delivery contact tony@macenews.com. Twitter headlines @macenewsmacro.