Japan’s core consumer prices dropped 0.1% in April, dragged down by a record fall in mobile phone fees despite a boost from energy prices, government data showed Friday.
The core consumer price index, excluding volatile fresh food items, marked the ninth straight month of decline as the Bank of Japan struggles to accelerate inflation toward its elusive 2% goal. The core consumer price index was down 0.1% in March.
Mobile phone fees tumbled 26.5% from a year earlier, the sharpest on record, becoming a big drag on the core CPI, as major carriers cut data usage fees in response to mounting government pressure.
That negative impact was softened by rising energy prices, the Internal Affairs and Communications Ministry data showed.
Reflecting higher crude oil prices, petroleum products gained 10.5%. Kerosene prices increased 11.8% while gasoline jumped 13.5%.
“Without the mobile phone impact, the CPI could have turned positive. The drag from lower mobile fees is expected to continue for the time being, keeping the CPI in negative territory,” said Toru Suehiro, a senior economist at Daiwa Securities Co.
Rising commodity prices have lifted prices of goods traded between companies. But economists say companies are seen as reluctant to pass them down to consumers at a time when demand is weak amid the pandemic.
“Supply concerns due to the temporary shutdown of the U.S. fuel pipeline have sent crude oil prices higher. That being said, the outlook (for price moves) is uncertain,” a ministry official said during a briefing.
Besides energy, accommodation fees rose 3.1% in April, a year after the country’s initial wave of coronavirus cases dented travel demand and pushed them down.
The government’s subsidy program introduced last year to spur local tourism had sent accommodation fees sharply lower. But the initiative has been suspended since late last year due to rising COVID-19 cases.
As people spend more time at home to reduce the risk of infection, demand for household items such as air conditioners remained strong. Durable goods gained 3.0%, according to the ministry data.
The CPI data underscores the challenge faced by the BOJ in attaining its 2% inflation target. The central bank expects the negative impact from the COVID-19 crisis and lower mobile phone fees to continue for the time being, but the underlying price trend to be steady.
Still, the BOJ projects a meager 0.1% year-on-year increase in the core CPI for the fiscal year starting in April.
Japan draws a sharp contrast with other major economies such as the United States where worries about inflation have grown and fueled expectations in financial markets that the U.S. Federal Reserve may pare back asset buying earlier than expected.
With populous areas such as Tokyo under a third state of COVID-19 emergency, the country’s relatively slow progress in vaccinations has clouded the outlook for the world’s third-largest economy.
“There is no concern about inflation in Japan at present,” said Daiwa Securities’ Suehiro. “Crude oil and commodity prices have been growing so are inflation concerns overseas. But we need to think about a reversal of the recent trend because it will have more of an impact on Japan in terms of prices.”
So-called core-core consumer prices, excluding fresh food and energy items, fell 0.2% in April from a year earlier, after three months of increase.
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