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Japan’s consumer price index up 1.9% in June, for 9th straight monthly increase

With a 1.9% jump in June, Japan’s core consumer prices have now risen every month so far this year, and for nine consecutive months overall, according to data released by the Ministry of Internal Affairs and Communications last week. Until September 2007, we had seen the exact opposite; Japan’s core consumer prices had fallen for nine consecutive months until that point.Last summer, Bank of Japan officials shrugged off the continually falling CPI by saying that lower energy prices had not yet been worked out of the CPI

Of course, Japan includes energy prices as part of its core CPI, and we have now seen for two straight years that it is necessary to keep track of not only “core” consumer prices, but also what the CPI looks like when energy is also stripped out. Here’s a breakdown of CPI categories for June:

• June general nationwide consumer price index: +2.0%
• June general nationwide consumer price index (excluding rent): +2.3%
• June nationwide core CPI (excluding fresh food): +1.9%
• June nationwide consumer price index (excluding fresh food and energy): +0.1%

Thus, with fresh food and energy prices stripped out (Japan also strips out the prices of alcoholic beverages, which have been on the rise), we see a 0.1% increase for the second time this year. This is only the second increase seen in this category over the past decade.

Here’s a breakdown of price increase by major category:

• Fuel, light and water charges +6.8%
• Transportation and communication +4.3%
• Food +3.6%
• Education +0.7%
• Miscellaneous +0.6%
• Clothes and footwear +0.5%
• Housing +0.2%
• Furniture and household utensils -0.4%
• Medical Care -0.5%
• Reading and recreation -0.6%

These figures are little changed from May. The same categories that rose in May rose again in June. Those that fell in May also fell in June. The largest differences can be found in the top three rising categories, which all saw increases at least 1% higher than a month ago.

Looking at individual categories, about 60% of products surveyed saw a rise in prices. Transportation expenses are pushing up the prices of fresh food as well; carrots, negi and spinach all cost over 10% more than a year ago.

The big question now is whether or not core CPI will see a jump above 2.0% in July, as 2.0% is what the Bank of Japan’s policy board considers to be the upper limit of price stability. Few expect to see a rate hike in August or September, but could the BOJ’s hand be forced by its own policy?

Japan’s consumer price index up 1.5% in May, but down 0.1% when food, energy stripped out

Data released by the Ministry of Internal Affairs and Communications shows that Japan’s core consumer price index rose 1.5% in May, showing an increase for the eighth month in a row. Media outlets have scrambled over one another to announce that May’s 1.5% rise was the highest seen since a 1.8% jump back in March 1998. That may be true, but it’s worth looking a bit deeper into the numbers than that.

First, it’s important to remember that Japan counts energy prices as part of core inflation, although fresh food is excluded. Thus, it’s helpful to strip both fresh food and energy costs in order to get a clearer picture of the situation. In March, we commented that once both 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. In April, that figure slid back to -0.1%. Here’s a breakdown for May:

• May general nationwide consumer price index: +1.3%
• May general nationwide consumer price index (excluding rent): +1.5%
• May nationwide core CPI (excluding fresh food): +1.5%
• May nationwide consumer price index (excluding fresh food and energy): -0.1%

Here is what the major media is either not reporting or downplaying in its coverage of this issue: Once fresh food and energy are both stripped out, we still see deflationary pressure in Japan’s consumer prices. This seems somewhat surprising, since we expect higher oil prices to have affected prices all the way from procurement to production, and shipping to storage - at least until the product hits this consumer - where we then expect to see increased prices to offset those supply-side costs. This is not, however, what’s happening, and perhaps we need to take a closer look at household spending statistics in order to see why. For now, though, it’s still food and energy prices that are driving Japan’s current inflationary trend. Food prices were up 2.4% in May and energy prices were up 10.5%, with gasoline prices soaring 18%.

Little relief appears to be in site for June or July’s figures, as oil just hit $140 a barrel.

Here’s a breakdown of price increase by major category:

• Fuel, light and water charges +5.5%
• Transportation and communication +2.9%
• Food +2.4%
• Education +0.7%
• Clothes and footwear +0.4%
• Miscellaneous +0.3%
• Housing +0.1%
• Medical Care -0.5%
• Reading and recreation -0.8%
• Furniture and household utensils -0.6%

Economic and fiscal policy minister Hiroko Ota (who was the last minister standing up and insisting that the Japanese economy was still in deflation a few months ago) put it simply: ”The CPI is not pulled up by demand. This is no good.”

Especially with spaghetti prices increasing 32.2%, cheese 27.7% and chocolate 23.2%.

Japan’s consumer prices show 0.9% rise in April

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: Read more

March consumer price index up 1.2% - is a pull out of deflation coming at the wrong time for the wrong reasons?

On Friday, the Statistics Bureau announced that Japan’s core consumer prices had risen 1.2% in March compared to a year earlier. This follows a1.0% rise in February and successive 0.8% rises in December and January. March was sixth consecutive month that core consumer prices showed an increase, and the 1.2% increase was the largest seen since a 1.8% jump back in March 1998.

What was different about March figures, however, was that when fresh food and energy costs were stripped from the index, consumer prices saw a rise of 0.1% - the first rise in this figure seen since 1998. Before we go any further, let’s take a look at all four consumer price measurement yardsticks and how they each fared in March:

• March general nationwide consumer price index: +1.2%
• March general nationwide consumer price index (excluding rent): +1.3%
• March January nationwide core CPI (excluding fresh food): +1.2%
• March January nationwide consumer price index (excluding fresh food and energy): +0.1%

Immediately after the numbers were released, Economic and Fiscal Policy Minister Hiroko Ota told reporters: Read more

Japan February CPI up 1.0%, Unemployment up 0.1%, Household Spending Unchanged

We will be getting into these figures a bit more later in the day, but for now just a quick note on the numbers released this morning by the Ministry of Internal Affairs and Communications:

February 2008 Nationwide Consumer Price Index: +1.0%
March 2008 Tokyo CPI: +0.6%

Unemployment: 3.9% (+0.1 from January)

February 2008 Household Spending: Unchanged at 275,827 yen from last year
Monthly household income: 476,282 yen, -0.1% from last year

Consumer price index up 0.8% in January on higher gasoline, kerosene, food prices

Earlier today, the Statistics Bureau announced that Japan’s core consumer prices had risen 0.8% in January compared to the same month last year. This matches the figure seen from December, and is the fourth straight month in which we’ve seen a rise in the nation’s core CPI. Before we go any further, let’s take a look at all four consumer price measurement yardsticks and how they each fared in January:

• January general nationwide consumer price index: +0.7%
• January general nationwide consumer price index (excluding rent): +0.9%
• January nationwide core CPI (excluding fresh food): +0.8%
• January nationwide consumer price index (excluding fresh food and energy): -0.1%

Those year-on-year comparison figures are actually no different from what we saw in December, in all four categories. However, the nationwide consumer price index excluding fresh food and energy was 0.6% lower than in December.

Nonetheless, consumer prices are now on an upward trend, though they are clearly being driven by energy and food prices. The ministry’s report tells us that gasoline prices have risen 16.1% from a year ago, and kerosene prices have leaped 24.9%. At the same time, spaghetti prices have shot up over ten percent, owning to the rise in wheat prices.

So what’s getting cheaper? Laptop and digital camera prices both fell over 30%, while cellular phone fees were down about 4%. We seem to remember the government saying that it was going to strip discounted cellular phone package prices from CPI due to the fact that they did not reflect ‘reality’. Right.

Here’s a breakdown of the categories and their price changes in January 2008:

• Fuel, light and water charges +3.7%
• Transportation and communication +2.6%
• Clothes and footwear +0.8%
• Education +0.7%
• Miscellaneous +0.6%
• Food +0.5%
• Housing 0.0
• Reading and recreation -0.5%
• Furniture and household utensils -1.6%

This certainly looks like a trend we’re going to continue seeing, at least for the rest of the first half of 2008, as oil and gas prices will no doubt remain above their 2007 levels and thus force up shipping, transportation, food, and other related costs. We’ll be looking at the household spending data next, wondering how these higher prices will have affected spending on food and utilities.

Japan’s core consumer price index up 0.8% in December on oil, transport, food price surges

The big story this morning is that “inflation has doubled in Japan” and “inflation hits 10 year high in Japan.”

Those, may be true, but let’s take a look at what actually happened with consumer prices in December. As Always, we need to point out that there are four different Consumer Price Index readings released by the Statistics Bureau each month. These are the ‘general’ index, ‘general’ excluding rent, the ‘core’ index and the ‘core’ index without energy prices included. Thus, Japan includes energy costs in core CPI. Looking at the data, we see how that plays out:

• December general nationwide consumer price index: +0.7%
• December general nationwide consumer price index (excluding rent): +0.9%
• December nationwide core CPI (excluding fresh food): +0.8%
• December nationwide consumer price index (excluding fresh food and energy): -0.1%

As in November, we are clearly seeing prices driven upward by high oil and food prices. Still, the 0.8% rise in core CPI is significant, as we have not seen such a leap since March 1998, when a 1.8 percent jump was registered.

Is it right to call these numbers ‘inflation’ in so many headlines? One story that did so, Reuters’ “Japan inflation hits 10-year high” quotes Morgan Stanley’s Takehiro Sato as saying:

The higher prices were mostly driven by food and energy, meaning they are deflationary, as nominal incomes remain weak. The near-term trend for the central bank is steady to lower policy, and after a new BOJ governor is named a new initiative may emerge…

Ok! That last part is interesting, but gets away from what we were interested in, which is the continued use of the word “deflationary.” Another word we’ve heard in conversation but not yet seen in print came up at a Bloomberg article this morning. Again, from Mr Sato: Read more

Japan’s nationwide core consumer prices up 0.4% in November on higher fuel, utility prices

Just two days ago, Bloomberg published its survey of economists and predicted that Japan’s core consumer price index had risen 0.3% in November. This afternoon, the Statistics Bureau released its CPI data and we found that in November, Japan’s nationwide core CPI went up 0.4 percent.

First, we need to keep in mind that Japan includes energy costs in core CPI. Rising oil prices have thus led to an expectation that consumer prices would rise in November, which turned out to be true. Looking at the data, we see how that plays out:

• November nationwide consumer price index: +0.6%
• November nationwide core CPI (excluding fresh food): +0.4%
• November nationwide consumer price index (excluding fresh food and energy): -0.1%

The report tells us that gasoline prices were up 10.9 percent in November, while kerosene prices jumped 11.8 percent. Here’s how the categories break down:

Fuel, light and water charges: +2.2%
Transportation and communication: +1.5%
Food: +0.9%
Clothes and footwear: +0.7%
Education: +0.7%
Miscellaneous: +0.5%

Housing: +0.0%

Medical care: -0.3%
Reading and recreation: -0.6%
Furniture and household utensils: -1.6%

This is the second month in a row that we’ve seen an increase in core CPI, following October’s rise. What might all this mean? Bloomberg speculates that higher oil prices may prove very damaging to the economy, especially if consumer spending is hit hard:

Households cut spending 0.6 percent, the first drop since July…Wages fell and employment prospects worsened as job seekers outnumbered vacancies for the first time in two years…The jobs-to-applicants ratio fell to 0.99 in November from 1.02 in October, the Labor Ministry said. Wages slid 0.2 percent from a year earlier. Pay has only risen in one month this year.

We will have more on the household spending data (and the good news on unemployment) soon, so we won’t get too much into it here. However, the cut in household spending does not bode well for GDP growth in the current and upcoming quarter. We know that the government is planning on spending 215 billion yen in an attempt to offset higher oil costs, but psychologically, this probably won’t make much of a difference. Higher bills are higher bills, and general sentiment seems to be that with the higher costs being inevitable this winter, there’s a need for a bit of belt-tightening when it comes to household finances.

With just over half of GDP represented by domestic demand, it’s looking more and more as if exports are going to have to carry the bulk of any GDP growth we may see in this quarter and over the next. Just today, we learned that the government claims “Japan’s economy can grow 2 percent or more in the next four years if the government carries out reforms.”

Would those reforms include an increased sales tax?

October consumer price index up 1.0 percent, first rise this year

Earlier today, the Statistics Bureau announced that Japan’s core consumer price index had risen 1.0% in October. This was the first rise seen in 2007.

The rise, however, appears to be on the back of increased fuel costs, especially for gasoline. Core CPI in Japan excludes fresh food but includes energy costs. Gasoline prices rose 3 percent in October, while household electric bills went up 1.4% on average.

With energy costs stripped out, CPI was down 0.1 percent.

When food costs are factored in, the CPI saw a rise of 0.3 percent.

Downward pressure on prices continues to be provided by home electronics. In October, flat-panel TV prices fell 17.1 percent, laptop prices fell 28.4 percent, and desktop computers saw a 16.6 percent drop in prices.

We don’t see these figures as providing the Bank of Japan with grounds enough to raise interest rates in December.

At a press conference this afternoon, Minister of Economy and Fiscal Policy Hiroko Ota stated that Japan was still in deflation, telling reporters, “The consumer price situation basically hasn’t yet changed.” Concerning the consequences of higher food and fuel prices, Ota expressed fear that they “could erode consumer confidence and business sentiment at small and medium-sized enterprises.”

At his press conference, Finance Minister Fukushiro Nukaga stuck to stating the obvious:

The consumer price index rose from a year earlier. I would like to keep closely monitoring how high oil prices will affect overall price conditions. I will do the same for job conditions.

In other words, he plans on showing up at work.

Make it nine straight months: Core consumer price index falls again in September

According to data released today by the Ministry of Internal Affairs and Communications, Japan’s core consumer prices fell for the ninth consecutive month in September, dropping 0.1%.

The overall consumer price index fell by 0.2% compared to September of last year, while in Tokyo it rose 0.1%.

Core consumer prices (which do not include fresh food) fell 0.1% nationwide and were unchanged on the year in Tokyo.

Core consumer prices minus energy costs (the system used in the US to compute core CPI) fell 0.3% nationwide and by the same rate in Tokyo.

Will this month’s figures again go unnoticed the Bank of Japan’s policy board? The Nikkei has already exhorted the bank to pay more attention to consumer sentiment in determining its policy on interest rate hikes, although some BOJ members have remained bullish in their statements supporting another rate hike sometime in the next few months…

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