–Processed Food Prices Continue to Lead Consumer Inflation, Pushing Up CPI Annual Rate by Nearly 2 Percentage Points
–Total CPI Annual Rate Also Moderates to 12-Month Low of 2.8% from 2.9% in August after Hitting 41-Year High of 4.4% in January
–Core-Core CPI (Ex-Fresh Food, Energy) Annual Rate Eases to 3.8% from 41-Year High of 4.0%
By Max Sato
(MaceNews) – Consumer inflation in Tokyo, the leading indicator of the national average, eased to a 14-month low of 2.5% in September in the core CPI (excluding fresh food) and to a 12-month low of 2.8% in total CPI after as utility charges fell at a faster pace and elevated processed food prices showed signs of peaking, data from the Ministry of Internal Affairs and Communications released Friday showed.
The core-core CPI (excluding fresh food and energy) annual rate also moderated to a three-month low of 3.8% in September from 4.0% in August, when it stayed at the 41-year high level first hit in July.
The key points from the Tokyo CPI data:
* The core consumer price index (excluding fresh food) in the capital’s 23 wards rose 2.5% in September, coming in slightly below the median economist forecast of a 2.6% rise (forecasts ranged from 2.3% to 2.9% gains). It is the 25th straight year-over-year rise but the slowest in 14 months, since the 2.3% rise seen in July 2022. It followed increases of 2.8% in August, 3.0% in July, 3.2% in June, 3.1% in May, 3.5% in April, 3.2% in March, 3.3% in February and 4.3% in January.
* In January, the core CPI’s annual rate rose at the fastest pace in more than 41 years, since the 4.3% rise in May 1981, with or without the direct impact of the sales tax hikes in 2014 and 1997 and the introduction of the tax in April 1989. Even during the 12-month period of being boosted by a sharp sales tax hike to 8% from 5% in April 2014, the core CPI peaked at a 2.8% rise. The sales tax is currently at 10% after another rise in 2019.
* The prices of goods excluding fresh food rose 3.2% from a year earlier in September, pushing up the Tokyo area total CPI by 1.33 percentage points, with the pace of increase decelerating further from 4.0% (a positive 1.64-point contribution) in August. The prices of services excluding owners’ equivalent rent gained 2.9% on the year, adding 1.03 points to the CPI, after rising 3.0% (plus 1.07 points) the previous month. The uptrend in services costs reflects moves among many firms to raise wages at the fastest pace in 30 years to secure workers.
* The core-core CPI (excluding fresh food and energy) — a key indicator of the underlying trend of inflation — rose 3.8% on the year in September for the 18th straight rise. It was below the median forecast of a 4.0% rise. It followed increases of 4.0% in August, 4.0% in July, 3.8% in June, 3.9% in May, 3.8% in April, 3.4% in March, 3.1% in February and 3.0% in January. The 4.0% gain is the highest in 41 years, since the 4.2% rise in April 1982. This measure is not affected by fluctuations in energy prices but it has been on an uptrend in the face of markups in processed food and durable goods as well as rising services costs.
* The total CPI gained 2.8% on year in September, marking the 25th straight year-over-year gain. It was in line with the median forecast of a 2.8% rise (forecasts ranged from 2.6% to 3.0% gains). It is the slowest rise in 12 months, since the 2.8% gain in September 2022. It followed increases of 2.9% in August, 3.2% each in July, June and May, 3.5% in April, 3.3% in March, 3.4% in February and 4.4% in January. The 4.4% increase in January is the largest in more than 41 years, since the 4.8% gain in June 1981.
* Fresh food prices, a volatile factor, continued rising, up 10.3% on year in September, pushing up the overall index by 0.42 percentage point. The pace of increase accelerated from a 4.2% rise and a 0.17-point contribution the previous month.
* The prices for both fresh and processed food and beverages — ranging from vegetables, meat and milk to buns, puddings and soft drinks — continued pushing consumer inflation higher from year-earlier levels as many firms had raised prices to reflect higher costs seen earlier.
* Food excluding perishables rose 8.5% on year (a 1.86-point contribution to the total CPI) in September after rising 8.9% in August with a 1.93-point contribution. This category replaced energy as the largest contributor to the CPI increase in October 2022 (1.27 points vs. 1.20 points) and the gap between the two has widened further as overall energy prices have eased from last year’s high levels.
* Energy prices slumped 18.7% on year in September, pushing down the total index by 1.10 percentage points, after falling 15.9% (minus 0.93 point) in August.
* In the energy category, gasoline prices rose 10.0% on the year with a positive 0.06-point contribution to the total CPI in September, up further from a 9.1% rise (plus 0.06 point) in August. It reflects a rebound in crude oil import costs and the move by the Japanese government to scale back the subsides to refineries.
* Electricity charges plunged 25.7% (minus 0.86 point) in September after dipping 22.3% (minus 0.74 point). The prices for natural gas supplied to homes via pipelines fell 17.1% (minus 0.31 point) after falling 14.0% (minus 0.25 point) the previous month. To help ease the pain of high costs for daily necessities, the government has been providing subsidies for electricity and natural gas since January (reflected in February bills onward). The program was scheduled to end in September but the government has decided to extend it through yearend.
* The prices for household durable goods posted their 18th straight year-over-year increase in September but the pace of the increase slowed further to 0.5% with a 0.01-point contribution after rising 1.2% (plus 0.01 point) in August.
* Accommodations costs maintained a high increase of 18.0% on the year with a positive 0.21-point contribution in September after an 18.1% rise (plus 0.24 point) in August, as pent-up demand for spending on services outpaced the slightly downward effects of travel subsidies.
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Contact this reporter: max@macenews.com
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