The consumer price index posted a unexpectedly small rise of 0.2 percent in July from the previous year as new index components, including flat-screen televisions, pushed it down and forced past readings to be downgraded, the government said Friday.
At the same time, the core nationwide CPI, excluding perishables, rose for a second consecutive month, bolstering distant views that the economy is emerging from deflation, albeit weakly.
But another change — the replacement of the base year for the CPI index — forced past readings to be revised downward, casting doubt on the government’s preparations to declare deflation finally dead.
“The past CPI data were revised by around 0.5 percentage point with the change of the base year,” a ministry official said. “One of the reasons for the downward revisions is that consumer spending concentrated on products showing sharp price falls.”
LCD TVs and DVD recorders are some of the new components logging price falls.
The core CPI registered 100.1 in the reporting month against the base of 100 for 2005, the Internal Affairs and Communications Ministry said in the preliminary report.
The market was expecting an average rise of 0.5 percent.
The base year switch to 2005 was carried out following a periodic change in CPI components that is conducted every five years.
This caused past CPI readings to be downgraded.
The May CPI, for example, was revised to a reading of unchanged instead of 0.6 percent growth, and the June CPI was slashed to a rise of 0.2 percent instead of 0.6 percent.
Private-sector economists were expecting the CPI data to be downgraded by only 0.2 to 0.3 percentage point after the new base year was applied. This has led some to warn of repercussions should the government decide to declare the end of deflation.
Takuji Aida, chief economist at Barclays Capital Japan Ltd., said the latest data suggest the Bank of Japan shouldn’t rush to hike interest rates.
Friday’s release of the CPI data also marked the government’s first official release of a more internationally prominent CPI reading that excludes food and energy prices. This reading fell 0.3 percent in July for the seventh consecutive monthly drop.
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