— Electricity Charge Rise Picks Up Pace, Gasoline Keeps Double-Digit Gain
— Higher Processed Food Prices Also Easing Effects of Lower Mobile Phone Fees
— Total CPI’s Annual Rate Marks 1st Gain in 12 Months on Fresh Food Prices
By Max Sato
(MaceNews) – The core reading of consumer prices in Tokyo, a leading indicator of the national average, continued firming in September, recording the first year-on-year increase in 14 months, as utilities and food processing companies passed higher production and import costs onto consumers, data from the Ministry of Internal Affairs and Communications released Tuesday showed.
All three key CPI measures rose on the month in September, with the total index in particular marking a sharp gain on higher costs for fresh vegetables, fish and meat.
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.
Looking ahead, however, the underlying inflation outlook remains uncertain when the impact of rising energy costs is excluded. Global growth prospects have been clouded by the threat of more contagious coronavirus variants.
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 dampen consumption amid slow wage growth.
Japan’s government has lifted a state of emergency on pandemic-hit regions and is gradually easing restrictions on business hours and public events. Over 60 percent of Japan’s population has been fully vaccinated, surpassing 55% in the U.S. This and the cautious behavior of people after a resurgence of Covid-19 infections in August appear to be behind the recent drop in new cases in Japan.
The key points from the Tokyo CPI data:
* The core consumer price index (excluding fresh food) in the capital’s 23 wards inched up 0.1% from a year earlier in September after being flat in August, coming in softer than the median economist forecast for a 0.2% rise. It was the first increase since July 2020, when the index gained 0.4%.
* The core-core CPI (excluding fresh food and energy) – a key indicator of the underlying trend of inflation – dipped 0.1% for the sixth 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 rebounded 0.3% on year in September after slipping 0.4% in August, marking the first year-on-year gain in 12 months. Fresh food prices, a volatile factor, rose 5.0% y/y in September, pushing up the overall index by 0.20 percentage point, compared to an 8.2% plunge and a negative 0.34-point contribution the previous month.
* Energy prices jumped 4.4% on year in September, pushing up the total index by 0.21 percentage point (vs. +0.9%, +0.04 point the previous month). The pace of increase in gasoline prices was little changed at +17.5% y/y (+0.09 percentage point contribution) in September vs. +17.8% (+0.09 point) in August. Electricity charges surged 4.8% (+0.12 point) vs. +0.4% (+0.01 point) the previous month.
* Among other gainers, household durable goods, such as refrigerators, continued rising on year, up 7.1% y/y (a positive 0.08 point contribution) in September vs. +10.5% (+0.11 point) the previous month. Demand for electric appliances and furniture remains solid in stay-home lifestyles during the pandemic.
* Food excluding perishables rose 0.3% (+0.07 point contribution) in September after recent drops (flat in August).
* Accommodations maintained a high pace of increase, up 43.1% y/y (+0.35 point contribution) in September vs. +46.6% (+0.41 point) in August, 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 44.8% on year and trimmed the total CPI by 0.94 percentage point in September, compared to a 44.8% drop (-0.93 point) in August.