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Japan’s consumer price index jumps 2.4% in August; retail sales showing slow growth

Data released last week by the Ministry of Internal Affairs and Communications showed Japan’s core consumer prices up 2.4% compared to a year ago, matching the figures seen in July. Core consumer prices have now risen for 11 straight months.

Because Japan includes energy prices as part of its core CPI, it’s also helpful to look at what the CPI looks like with energy stripped out. Here’s a breakdown of CPI categories for August:

• August general nationwide consumer price index: +2.1% (+2.3% in July)
• August general nationwide consumer price index (excluding rent): +2.5% (+2.8% in July)
• August nationwide core CPI (excluding fresh food): +2.4% (+2.4% in July)
• August nationwide consumer price index (excluding fresh food and energy): +0.0 (+0.2% in July)

In July, we saw CPI excluding fresh food and energy rise for the second month in a row, and the third time over the past decade. In August, that figure fell back to flat. In fact, three of the four CPI categories backed off from their July levels, with only the “core” CPI remaining at the same level.

This is by no means a trend yet, but the possibility of CPI rises easing over the coming months is strong. September 2007 was the last month in which core CPI fell, and CPI excluding energy fell by 0.3% in that month. Thus, from October we should start to see current figures compared against the rise in fuel prices that began late last year - although those prices are certainly still much higher now.

A breakdown of price increase by major categories:

• Fuel, light and water charges +9.7%
• Transportation and communication +4.7%
• Food +3.0%
• Education +0.7%
• Miscellaneous +0.4%
• Clothes and footwear +0.3%
• Housing +0.2%
• Furniture and household utensils +0.2%
• Reading and recreation -0.4%
• Medical Care -0.5%

Individual category data is little changed from last month, with the same eight categories up and the same two down. Energy, transportation, communication and food price hikes continue to drive the rise in CPI. It’s also worth noting that while clothing and footwear prices were up 0.3% year-on-year, they actually fell 1.7% compared to July.

Retail Sales

Yesterday, the Ministry of Trade, Economy and Industry announced that retail sales had risen 0.7% year-on-year in August, compared to 2.0% in July. Although several news sources have reported this as something of a slowdown in sales, 0.7% growth is still much better than we saw in April, May or June, when sales rose by a paltry 0.1%, 0.3% and 0.3%, respectively.

Large-scale retail stores accounted for about 10% of total retail sales nationwide, and their figures slipped 1.0% compared to August 2007. While overall retail sales have shown growth every month so far this year, sales at large-scale stores have fallen in five of the eight months reported thus far in 2008.

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