• Kyodo News


The key consumer price index in April fell 1.5 percent from a year earlier for the 14th straight monthly decline, the government said Friday, indicating mild deflation persists, in line with the government’s view.

However, the pace of decline widened for the first time in eight months, largely because of a newly introduced tuition waiver at high schools. Analysts meanwhile projected that the pace of decline will begin to follow a shrinking trend on the back of an expected economic recovery.

The core nationwide CPI, which excludes volatile fresh food prices, stood at 99.2 against the base of 100 for 2005, the Internal Affairs and Communications Ministry said in a preliminary report.

The headline reading compared with the average market forecast of a 1.4 percent fall in a Kyodo News survey.

Referring to the just-released data, Finance Minister Naoto Kan said, “The consumer price index is still somewhat in a declining trend, so mild deflation is continuing.”

A government official said legislation to waive tuition for students attending public high schools and provide tuition aid to those attending private schools was a key factor that dragged down the index. The law took effect in April.

If the impact of the tuition waiver is excluded, the rate of decline would have been 0.9 percent, according to the official.

Yoshiki Shinke, senior economist at Dai-ichi Life Research Institute, predicted the pace of decline is likely to “continue to contract moderately for the time being,” as he sees the economic recovery finally starting to have an impact on prices.

He also said the latest figure itself is unlikely to put pressure on the Bank of Japan for further monetary easing, as it was probably in the range of the central bank’s expectations.

But Shinke also said it would take time for deflation to end and conditions in the financial markets, which have been unstable recently amid continued euro-zone debt woes, could become a factor that could put such pressure on the BOJ.

By product, laptop computer prices plunged 36.2 percent and those of cameras plummeted 31.5 percent. Nonperishable food, including cooking oil and spaghetti, fell 1.6 percent.

Reflecting the rise in crude oil prices, gasoline prices jumped 17.0 percent and heating oil 19.2 percent.

The core CPI for Tokyo’s 23 wards in May fell 1.6 percent from a year earlier to 98.8 for the 13th consecutive monthly decline, the ministry said. The average projection was for a 1.5 percent fall.

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