— Electricity Charges, Gasoline Prices Pick Up Pace of Y/Y Gains
— Mobile Communication Fees Show Deeper Drop, Limiting CPI Rise
By Max Sato
(MaceNews) – The core reading of consumer prices in Tokyo, a leading indicator of the national average, posted the second consecutive but small year-over-year gain in October as higher electricity bills and hotel fees were partly offset by a deeper fall in mobile communications costs, data from the Ministry of Internal Affairs and Communications released Friday showed.
The base effect of higher property insurance premiums as well as double-digit hotel fee gains in reaction to last year’s subsidized discounts eased the downward pressure from low-cost monthly data plans introduced in April by major mobile phone carriers and an additional cheaper plan for low data usage offered in July.
The prices for dairy products, bread, coffee and utilities were raised in Japan on Oct. 1, reflecting a recent surge in material costs. This will help push the annual inflation rate from near zero but if companies continue passing higher costs onto consumers, it would also dampen consumption amid slow wage growth.
Japan’s government lifted a state of emergency on pandemic-hit regions on Oct. 1 and municipalities have been gradually easing restrictions on business hours and public events, but the economic outlook remains uncertain in the face of global supply chain disruptions and severe labor shortages for some sectors.
The key points from the Tokyo CPI data:
- The core consumer price index (excluding fresh food) in the capital’s 23 wards rose just 0.1% from a year earlier in October after edging up 0.1% in September, which was the first increase in 14 months It was weaker than the median economist forecast for a 0.3% rise.
- The core-core CPI (excluding fresh food and energy) – a key indicator of the underlying trend of inflation – dipped 0.4% for the seventh straight year-on-year decline after falling 0.1% the previous month. This measure does not receive support from a recovery trend in energy prices seen earlier this year.
- The total CPI rose 0.1% on year in October after marking its first year-over-year gain in 12 months in September (up 0.3%). Fresh food prices, a volatile factor, gained 0.5% on year this month, pushing up the overall index by 0.02 percentage point, compared to a sharper 4.0% rise and a positive 0.16-point contribution the previous month.
- Energy prices jumped 9.1% on year in October, pushing up the total index by 0.41 percentage point (vs. +4.4%, +0.21 point the previous month). The pace of increase in gasoline prices also accelerated to +22.3% y/y (+0.11 percentage point contribution) vs. +17.5% (+0.09 point) in September. Electricity charges showed another month of a large increase, up 9.3% (+0.23 point) after +4.8% (+0.12 point) the previous month.
- Household durable goods continued rising on year but at a slower pace of 2.1% on year (a positive 0.02 point contribution) in October after +7.1% (+0.08 point) the previous month. Demand for electric appliances and furniture has been generally healthy in stay-home lifestyles during the pandemic.
- Food excluding perishables rose 0.3% (+0.06 point contribution) in October after rising 0.3% (+0.07 point) in September and falling in recent months.
- Accommodations maintained a high pace of increase, up 59.1% y/y (+0.43 point contribution) in October vs. +43.1% (+0.35 point) in September, in reaction to subsidized discounts seen a year earlier. The government suspended its controversial ‘Go To Travel’ campaign in late December after seeing a spike in coronavirus cases. The program was launched in July 2020 to subsize hefty discounts on hotel fees and domestic transportation costs.
- The downward pressure continued to come from lower mobile communications fees, which slumped 53.6% on year and trimmed the total CPI by 1.12 percentage points in October, compared to a 44.8% drop (-0.94 point) in September.
BOJ Sees Gradual CPI Rise
In its quarterly Outlook Report issued Thursday, the Bank of Japan said it continued to expect inflation to pick up gradually from around zero now and reach 1% in about two to three years, a standard scenario unchanged from its previous reports released in July and April.
For fiscal 2021 ending next March, the median forecast for the core consumer price index (excluding perishables) by the BOJ board was 0%, revised down from +0.6% due to largely technical reasons. CPI data’s base year shift to 2020 from 2015 in August resulted in sharp downward revisions to recent figures, reflecting large discounts in mobile phone charges by major carriers in April, which was given a heavier weighting in the latest statistical formula.
Contact this reporter: max@macenews.com
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