Japan’s consumer prices show 0.9% rise in April

May 30, 2008
By Ken Worsley

A slew of economic reports released today indicated that the Japanese economy may be running into trouble. Unemployment was up, production down, and consumer spending fell much lower than what most observers had anticipated. It was also announced that consumer prices rose 0.9% in April, after having seen a 1.2% rise in March.

April’s figures were impacted by the lapsing of the gasoline tax law on April 1, but the reinstatement of that law in May means that strong upward pressure on consumer prices will remain. In April, gasoline prices rose 0.7% after having shot up 19.0% in March.

April was thus the seventh consecutive month in which consumer prices have risen. Last month, we commented that once fresh food and energy costs were stripped from the CPI, consumer prices had actually seen a rise of 0.1% - the first rise seen since 1998. Japan counts energy, but not fresh food prices, as part of core CPI. Here’s how the figures played out for April:

April general nationwide consumer price index: +0.8%
April general nationwide consumer price index (excluding rent): +1.0%
April January nationwide core CPI (excluding fresh food): +0.9%
April January nationwide consumer price index (excluding fresh food and energy): -0.1%

When fresh food and energy prices are stripped out, the CPI again seems to have slipped into negative territory. Is there a chance that deflation yet survives? In some sectors, perhaps, but not in the areas that are currently crimping corporate profits. Immediately after the results were announced, economic and fiscal policy minister Hiroko Ota told reporters, “Price hikes led only by higher raw material costs put pressure on corporate profits.”

Here’s a breakdown of how prices fared by major category:

Fuel, light and water charges +5.5%
Food +2.0%
Education +0.7%
Clothes and footwear +0.5%
Miscellaneous +0.4%
Housing +0.1%
Transportation and communication -0.3%
Medical Care -0.5%
Reading and recreation -0.6%
Furniture and household utensils -0.9%

Utilities and food prices continued to drive the inflation, as grain prices increased 4.7%, spaghetti prices shot up 30.2%, instant noodles cost 18.4% more and bread prices increased 10.8%.

On the other hand, inflation was kept somewhat in check by the continuing decrease in the prices of electronic products, such as televisions, computers and digital cameras.

Consumer spending also took a hit in April, and we’ll be taking a look at that in the next post.

Filed Under Consumer Price Index, Economic Reports