Japan Nov Core CPI Drop Shrinks, Total CPI Up, on Tobacco Tax

  • Japan Nov Core CPI -0.5% Y/Y, 21st Drop In Row, But Above Oct -0.6%
  • Japan Nov Total CPI +0.1% Y/Y, 2nd Y/Y Rise in Row
  • Central Tokyo Dec Core CPI -0.4% Y/Y Vs Nov -0.5%, 20th Drop In Row
  • Japan CPI Shows Nov Energy Costs +3.9% Y/Y Vs Oct +4.0%

Japan’s national core consumer prices fell 0.5% in November from a year earlier, posting the 21st straight y/y drop and indicating that the economy is still mired in deflation, data releasedTuesday by the Ministry of Internal Affairs and Communications showed.

But the pace of decline in the core CPI — excluding fresh food but including energy — slowed from -0.6% in October, due largely to the tobacco tax hike that took effect on Oct. 1.

Total national CPI, meantime, rose 0.1% in November from a year earlier on higher costs for fresh vegetables, cigarettes and utilities,marking the second straight monthly rise. In October, it posted the first y/y rise since +0.4% in December 2008.

The tax hike raised cigarette prices 38.6% on year at the national level in November, pushing up total CPI by 0.27 percentage point.

The November core CPI came in slightly better than the -0.6% median forecast in an MNI survey of economists.

Continued sharp discounts on durable goods – refrigerators,flat-screen TVs and personal computers — contributed to the core price drop, overwhelming year-over-year gains in costs for tobacco as well as gasoline and heating oil.

Core CPI has shown widespread declines in prices of goods and services as retailers cut prices to lure cautious customers. In addition, technological advances has made higher quality products available at the same or lower prices.

High school tuition costs fell 17.4% in November from a year before, contributing -0.49 percentage point to the total CPI.

Overall energy costs in November rose 3.9% following a gain of 4.0% in October.

Electricity costs were up 2.0% y/y in November vs. +3.0% in October while city gas was up 6.1% vs. +6.8% the previous month. Prices of
refined petroleum products rose 5.0% in November following a +4.0% in October, but slower than +7.0% in August, +7.8% in July and +12.3% in June. The y/y rise in gasoline prices was faster at +4.3% in November from +2.7% in October, while the pace of increase in heating oil accelerated to +12.4% in November from +12.3% in the previous month.

The average price of regular gasoline in Japan rose to Y133.7 ($1.60) per liter, or $6.1 per gallon, last week from Y133.2 in the previous week, posting the fourth straight weekly rise, according to data released last week by the Oil Information Center.

The Bank of Japan has said high school tuition cuts, whose effect on CPI will last for 12 months from last April, should be excluded when gauging the consumer price trend.

The BOJ has also said that the year-on-year rate of decline in core CPI is expected to slow as the negative output gap — excess capacity vs. slack demand — continues to shrink gradually. The bank’s board expects the core CPI to rise 0.1% on average in fiscal 2011 after two years of declines.

The government also expects the CPI to start rising on a year-on-year basis in fiscal 2011 and seeks to achieve an average 1% rise in prices through fiscal 2020. Unlike some other countries, Japan’s government and central bank do not set a common inflation target.

On a month-over-month basis, the core national CPI fell 0.1% in November after a gain of 0.4% in October, due chiefly to lower food prices.

Meanwhile, central Tokyo core CPI fell 0.4% year-on-year in December, the 20th straight y/y drop, but a slight improvement from -0.5% in November.

The December decline was the smallest since the unchanged reading in April 2009. It was the smallest drop during the current downtrend that began with -0.7% in May 2009 and bottomed out at -2.2% in October 2009.

Tokyo-area gasoline and heating oil prices continued to rise from year-earlier levels. Gasoline rose 4.2% y/y in December vs. +3.9% in November while kerosene was up 10.1% in December vs. +7.9% in the previous month.

Overall energy costs in the area rose 3.2% y/y in December, down from +4.1% in November

Month-on-month, core central Tokyo CPI fell 0.1% in December after dipping 0.1% in November.

CPI figures date to 1970 under the current 2005 base year.

Other details from the latest data:

National CPI excluding food and energy, or the U.S. style core CPI(y/y): November -0.9% vs October -0.8%, the 23rd straight on-year drop.

Tokyo CPI excluding food and energy (y/y): December -0.5% vs November -0.6%, in negative territory for the 24th straight month.

source: forexlive.com

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