Consumer prices in Tokyo’s 23 wards rose in October from a year earlier for the first time in more than eight years, pushed up by increases in rents, clothing prices and medical expenses, the government said Friday.
The core consumer price index, which excludes perishable food prices, rose 0.1 percent from a year ago to 100.3 against the base of 100 for 2005, posting the first rise since August 1998, the Internal Affairs and Communications Ministry said in a preliminary report.
Consumer prices in Tokyo are seen as the leading indicator of prices nationwide. The result matched the average market forecast.
The year-on-year change in Tokyo’s core CPI had stayed lower compared with the previous year until May and stayed flat for four months up to September.
Across Japan, the core CPI grew 0.2 percent in September from a year earlier to 100.4, up for the fourth straight month, supported by high oil prices.
But the margin of growth was smaller than the 0.3 percent marked in August, in line with a pause in surging oil prices in the global market.
The reading was below the average market projection of a 0.3 percent increase.
The outcome of the nationwide data triggered selling of the yen and a decline in Japanese government bond yields, as the smaller-than-expected CPI growth stirred speculation that the Bank of Japan will refrain from raising interest rates by the end of the year.
Although the Tokyo CPI data were upbeat, the market reacted to the nationwide figure since the BOJ attaches greater importance to that than to prices in the capital in weighing its monetary policy.
Economic and Fiscal Policy Minister Hiroko Ota said the four-month consecutive increase in the core nationwide CPI shows that the stable price trend remains unchanged.
But she reiterated the government’s view that although price falls have stopped, the state needs to monitor other inflation gauges, including the gross domestic product deflator, to decide on whether to declare that the nation has overcome deflation.
Makoto Ishikawa, an economist at Japan Research Institute, said the positive Tokyo core CPI data confirmed that the country has been experiencing mild price increases as the supply-demand balance has improved with its economic recovery.
“Price trends in Tokyo had lagged behind nationwide trends, but they finally got out of minus territory. This supports our basic recognition that price levels will continue to post small year-on-year rises,” he said.
Ishikawa said prices are unlikely to start registering larger gains because of easing oil prices and a slow rise in wage levels, keeping consumers inclined to opt for cheaper food and clothing.
He said the BOJ is expected to interpret the latest CPI data as backing its bullish view that basic price trends will continue to rise, but that some cautious government officials will try to wait for a little longer before announcing Japan’s full exit from deflation to weigh risks of future price falls.
Including perishables, the nationwide CPI climbed 0.6 percent to 100.8 for the fifth consecutive monthly rise, backed by price increases in fresh vegetables and kerosene.
The overall CPI for Tokyo in October expanded 0.5 percent to 100.6, logging a gain for the fifth month in a row, on rises in prices of fresh vegetables, gas and clothing, notably women’s jackets.
Excluding food and energy prices, the nationwide CPI dropped 0.5 percent in September, down for the ninth consecutive month.
The margin of decline was up slightly from a 0.4 percent slip in August, pushed down by declines in airfares due to discounts after the peak summer season and lowered shirt, sweater and underwear prices in bargain sales.
The CPI without food and energy prices is similar to indicators used in the United States, and some experts say it better reflects price trends.
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