The recent reportage on core consumer prices in Japan narrowed their annual pace of falls for three straight months in July, a sign global commodities inflation was offsetting some of the deflationary pressure from a pandemic-induced spending slump.
But analysts expect consumer inflation to stay well below levels seen in the United States and Europe, as Japan’s decision on Tuesday to extend state of emergency curbs into mid-September is seen dealing a blow to already weak household spending.
“Cost-push inflation is driving up goods prices, while service prices remain weak due to the pandemic’s impact,” said Toru Suehiro, an economist at Daiwa Securities.
“Given the increase in Delta variant cases, this trend will continue for the time being.”
Japan’s core consumer price index (CPI), which includes oil but excludes fresh food prices, fell 0.2% in July from a year earlier, marking the 12th straight month of declines, government data showed on Friday.
The fall was due in part to a change in the base year for the CPI that gives a heavier weighting to mobile charge fees, which plunged a record 39.6% in July.
But the drop was smaller than market forecasts for a 0.4% fall and a 0.5% decrease in June due to the boost from rising food and fuel costs, including a 19.6% spike in gasoline bills.
Prices of refrigerators and air conditioners, as well as accommodation fees, also rose in a sign some households were keen to spend after hunkering down during repeated stop-and-go state of emergency curbs.
But the pent-up demand is still too weak for companies to pass on rising costs to households as aggressively as their counterparts in western economies, analysts say.
The drop in consumer prices in Japan contrasts sharply with moves in wholesale prices, which spiked 5.6% in July to mark the fastest annual increase in 13 years.
The so-called core-core consumer price index, which strips away not just fresh food but energy costs, fell 0.6% in July from a year earlier.
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