Tokyo consumer prices were flat in June, halting a 10-month slide amid firmer global energy markets and despite business restrictions that remain in place to contain the coronavirus.
Prices in the capital excluding fresh food were unchanged from a year earlier, with the gauge getting support from higher education costs and moderating falls in electricity bills, the internal affairs ministry reported Friday. Analysts had forecast a 0.1% drop in the headline figure.
While rebounding global energy markets are buoying prices, Japan’s situation contrasts with the United States and other countries, where fear of inflation has started to fuel expectations for an eventual withdrawal of central bank stimulus. The Bank of Japan doesn’t see inflation hitting its 2% target before 2024, meaning it’s likely to keep easing for the foreseeable future.
“Beyond energy, Japan’s prices are hardly moving,” said economist Takeshi Minami at Norinchukin Research Institute. “There’s concern over supply constraints in some specific places, but it’s not a general issue,” he said, contrasting Japan with the U.S., where supplies are falling behind a demand boom as the economy reopens.
Economist Yuichi Kodama at Meiji Yasuda Research Institute said he expects Japanese consumers to splash out a little bit once the country’s vaccination drive reaches more people and public safety improves. “But it will be limited compared with the U.S,” he said.
In the short-term, continued restrictions on businesses to contain the virus are discouraging spending.
The government is still asking bars and restaurants to close by 8 p.m., even after lifting the latest state of emergency in most regions of the country.
Japan’s price weakness has been exacerbated by special factors, including cuts to mobile phone fees that were pushed by Prime Minister Yoshihide Suga.
Charges fell 28% in Tokyo this month versus last year, shaving more than 0.4 percentage point from overall prices.
“Tokyo’s 0% inflation in June is nothing to cheer about, except when it’s cast against the backdrop of 10 months of deflation that it broke,” said Yuki Masujima, economist at Bloomberg Economics. “It’s incremental progress but doesn’t change the big picture — the Bank of Japan has to keep slugging away at its reflation effort.”
Overall Tokyo prices were flat, as was a narrower index that strips out costs of fresh food and energy. Economists had predicted falls in both gauges.
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