— Smaller Processed Food Price Drop, Newspaper Markups Also Support CPI
— Total CPI in Capital Dips on Slump in Volatile Fresh Food Prices
By Max Sato
(MaceNews) – Consumer prices in Tokyo, a leading indicator of the national average, posted the first year-on-year rise in 12 months in July in the core measure, as gasoline-led higher energy costs and a smaller drop in some food prices mitigated the lingering effect of large discounts in mobile communications fees introduced in April, data from the Ministry of Internal Affairs and Communications released Tuesday showed.
Markups in air conditioners, newspapers, property insurance premiums also supported overall prices, but the total CPI showed a slight drop from a year earlier, hit by a sharp decline in some fresh food prices.
Consumption on services has been sluggish this year due to restrictions on economic activity and overall private consumption in GDP is expected to remain weak in the July-September quarter, although spending on some goods, including TVs and air conditioners, is likely to stay solid.
Surging cases of infections to the Delta variant prompted the government to expand the areas of strict restrictions from Tokyo and Okinawa to three prefectures around the capital as well as Osaka, a western commercial hub, effective until Aug. 31.
The key points from the CPI data:
The core consumer price index (excluding fresh food) in the capital’s 23 wards edged up 0.1% on year in July after being flat in June, marking the first y/y gain in 12 months. It was firmer than the median economist forecast of being unchanged.
The core-core CPI (excluding fresh food and energy) – a key indicator of the underlying trend of inflation – was flat on year for the second straight month. This measure does not receive support from recovering energy markets.
The total CPI dipped 0.1% on year in July after being unchanged in June and sliding for the eight previous months. Fresh food prices, a volatile factor, slumped 2.8% y/y in July, pushing down the overall index by 0.12 percentage point, compared to a 0.5% rise and a positive 0.02-point contribution the previous month.
Energy prices posted the first year-on-year increase in nearly two years, up 1.1% in July, pushing up the total index by 0.06 percentage point (vs. -0.4%, -0.02 point the previous month). Gasoline prices continued leading the recovery, up 20.2% y/y (+0.13 percentage point contribution) in July after +17.4% (+0.11 point) in June. The y/y drop in utility charges continued shrinking.
Among other gainers, household durable goods, such as air conditioners during Japan’s long humid summer, continued rising on year, up 7.6% y/y (a positive 0.07-point contribution) in July vs. +5.7% (+0.06 point) the previous month. Demand for electric appliances and furniture remains generally strong in stay-home lifestyles during the pandemic.
Newspaper prices rose 4.5% on year, pushing up the CPI by 0.04 percentage point, after being flat and having no impact on the index the previous month.
On the other hand, food excluding perishables were below year-earlier levels for the third straight month, down 0.1% in July (-0.02 percentage point) vs. -0.3% (-0.07 point) in June.
The downward pressure continued to come from lower mobile communications fees, which plunged 29.1% on year and trimmed the total CPI by 0.46 percentage point in July, compared to a 15.3% drop (-0.47 point) in June. Major mobile phone carriers slashed monthly communications fees for various plans in April in response to a persistent government request.
The slight upward pressure from some items was partly canceled by a slower year-on-year increase in supplementary education costs, which rose 2.6% in July and raised the CPI by 0.03 point, compared to +11.4% (+0.11 point) in June. Economic activity slowed sharply in the April-June quarter of 2020, when the first wave of the pandemic had a severe impact.
Accommodations rose 0.9% y/y (+0.01 point contribution) in July vs. +0.9 (+0.01 point contribution) in June, being neutral to the y/y change in the CPI. The government suspended its controversial ‘Go To Travel’ campaign in late December after seeing a spike in new coronavirus cases. The program was launched in July 2020 to subsidize hefty discounts on hotel fees and domestic transportation costs, and was aimed at shoring up the hard-hit tourism industry.
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Contact this reporter: max@macenews.com.
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