Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Japan's consumer inflation turns positive as energy costs rise

Published 2021-10-21, 08:47 p/m
Updated 2021-10-22, 05:50 a/m
© Reuters. FILE PHOTO: A shop employee holds a placard to attract costomers in Tokyo, Japan May 16, 2018.  REUTERS/Issei Kato/File Photo

© Reuters. FILE PHOTO: A shop employee holds a placard to attract costomers in Tokyo, Japan May 16, 2018. REUTERS/Issei Kato/File Photo

By Leika Kihara

TOKYO (Reuters) - Japan's core consumer prices rose in September for the first time since the early stages of the coronavirus pandemic in March 2020, a sign that rising energy and raw material costs are gradually pushing up inflation.

Analysts expect rising fuel costs to accelerate consumer inflation in coming months, though any increase will be modest compared with other advanced economies as sluggish wage growth weighs on consumption and keeps firms from hiking prices much.

"Looking through artificial distortions and one-off hits, we expect underlying inflation to peak just shy of +1.0% early next year before falling back," said Tom Learmouth, an economist at Capital Economics.

The core consumer price index (CPI), which excludes volatile fresh food prices but includes fuel costs, rose 0.1% in September from a year earlier, government data showed on Friday, matching a median market forecast. It was unchanged in August.

The gain was driven mostly by a 7.4% spike in energy costs, which was the biggest annual rise in nearly three years. Gasoline costs surged 16.5% in September from a year earlier.

Processed food and durable goods also saw prices perk up, though the increase was more than offset by a 44.8% plunge in telecommunication fees as cellphone carriers slashed charges.

Analysts expect core consumer inflation to head toward 1% in coming months as recent rises in crude oil costs are seen pushing up electricity bills with a lag of three to five months.

But many of them doubt such cost-push inflation will lead to broader, sustainable price growth.

"The reopening of Japan's economy could lift service spending and foster price rises," said Takeshi Minami, chief economist at Norinchukin Research Institute.

"But Japanese households tend to shift to cheaper goods when the price hike continues, which in turn may induce a price-cut battle among companies," he said.

The data will be among factors the Bank of Japan will consider at next week's policy meeting, when it releases fresh quarterly growth and inflation projections.

© Reuters. FILE PHOTO: A shop employee holds a placard to attract costomers in Tokyo, Japan May 16, 2018.  REUTERS/Issei Kato/File Photo

Japan has not been immune to global commodity inflation, with wholesale prices surging at a 13-year high of 6.3% in September, putting pressure on corporate profit margins and raising the risk of unwanted consumer price hikes.

But consumer inflation has been stuck around zero as firms remain reluctant to pass on costs to households, reinforcing expectations the BOJ's 2% target will remain elusive.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.