Japan's core consumer prices rose 3.1 percent in February from a year earlier, slowing from a four-decade high as government subsidies on utility bills curbed inflationary pressure while surging food prices threaten to dampen household sentiment, government data showed Friday.
The resource-scarce nation saw the pace of gain in the key gauge of inflation slow for the first time in 13 months, providing relief to Prime Minister Fumio Kishida ahead of nationwide local elections this spring.
Inflation has remained well above the Bank of Japan's 2 percent target for nearly a year, ensuring the Japanese central bank will likely continue to feel pressure to roll back monetary stimulus under its new governor who assumes the post in April.
The core consumer price index excluding volatile fresh food items would have risen around 4.2 percent in February without the government subsidies on electricity and gas bills, according to the Ministry of Internal Affairs and Communications.
In January, the index rose 4.2 percent, the fastest pace of gain since 1981, highlighting the nation's sensitivity to swings in energy and commodity prices and the yen's sharp depreciation that has inflated their import costs.
Japanese households are increasingly feeling the pain of rising prices of everyday goods, as companies continue to pass on higher raw material costs to consumers. More robust wage growth to keep pace with inflation is crucial in supporting domestic demand which has so far remained resilient.
Food prices rose 7.8 percent, the fastest pace in nearly 47 years, as higher raw material and transportation costs made a range of products from hamburgers to chocolate pricier. Egg prices surged 19.9 percent amid bird flu-related supply concerns.
Subsidies to reduce electricity and gas bills began in January, as the lagging impact of surging crude oil and natural gas prices seen last year continued to feed through.
The government unveiled this week a fresh 2 trillion yen ($15 billion) inflation relief package that includes cash handouts to low-income families.
Energy prices dipped 0.7 percent, the first fall in nearly two years. Electricity bills fell 5.5 percent while city gas gained 16.6 percent, though at half the pace of the previous month.
"Food price hikes are expected in the coming months, in a blow to households. Inflationary pressure remains strong but wages are also rising so consumption will likely be supported," said Yuichi Kodama, chief economist at the Meiji Yasuda Research Institute.
"Difficult times lie ahead until around this summer. After that, we expect slower CPI growth, because the surge in crude oil prices and the yen's weakening have paused, and food prices will likely stabilize," he added.
When fresh food and energy prices are excluded, so-called "core-core" CPI gained 3.5 percent, the fastest rise in 41 years.
The BOJ has said the recent spike in inflation should be temporary, given that it is largely driven by higher import costs. It forecasts core CPI will undershoot its 2 percent target later this year.
The central bank aims to ensure stable inflation accompanied by robust wage growth.
Companies have agreed to raise pay by an average of 3.8 percent during this year's wage negotiations between labor unions and management, according to the Japanese Trade Union Confederation known as Rengo. The preliminary data boosts the likelihood the final results will show the sharpest gain in three decades
Source KYODO NEWS
BDST: 1157 HRS, MAR 24, 2023
MSK
