Japan July Core CPI +0.5% Y/Y on Energy, Highest Since Dec '14

--Japan July Core CPI +0.5% Y/Y; MNI Median +0.5%; June +0.4% 

--Tokyo Aug Core CPI +0.4% Y/Y; MNI Median +0.3%; July +0.2%

     TOKYO (MNI) - Japan's consumer price index from the Ministry of Internal

Affairs and Communications released Friday. CPI figures date to 1970 under the

2015 base year.

     * Japan's national average core CPI (excluding fresh food but including

energy prices) rose 0.5% on year in July, as expected, marking the seventh

straight year-on-year rise after +0.4% in June. The indicator of inflation

posted the first rise in 13 months in January.

     * It is a slow step forward toward the Bank of Japan's 2% inflation target

but the biggest rise since December 2014, when the index rose 2.5% on year, or

0.5% excluding the direct impact of the sales tax hike in April 2014.

     * The increase in July was led by higher electricity and gas charges in

addition to gasoline prices. Prices for household durable goods and overseas

holiday tours were unchanged on year, picking up from recent drops. Judging from

the seasonally adjusted level of the core CPI at 100.1 in July, the index is

likely to continue edging up from year-earlier levels in coming months due to

favorable base effects, given the level ranged lower from 99.5 to 99.8 between

August and December 2016.

     * Year-on-year gains in overall energy costs, with the increase in gasoline

prices accelerating slightly, are expected to support a gradual rise in consumer

prices.  But firms remain cautious about raising retail prices for fear of

losing market share or denting private consumption. Some retailers are giving

discounts on a wide range of goods in tough competition.

     * Excluding the upward pressure from energy prices, the underlying price

trend has shown a slow improvement. The CPI excluding fresh food and energy (the

core-core CPI) rose 0.1% on year in July, after being flat in the previous three

months and falling 0.1% in March.

     * In July, the year-on-year increase in gasoline prices accelerated to

+6.3% from +6.1% in June and electricity charges posted a 6.1% rise after rising

4.9% in the previous month. Overall energy costs rose 5.8% on year in July after

rising 4.9% in June.

     * The total CPI also gained 0.4% on year, posting the 10th straight

year-on-year rise after +0.4% in June. The increase was led by the same factors

as seen in the previous month: markups for marine products and beer as well as

continued gains in energy costs.

     * The central Tokyo core CPI rose 0.4% on year in August, slightly firmer

than the MNI economist median forecast for +0.3%. It was the second consecutive

year-on-year rise after +0.2% in July. The increase was led by higher prices for

utilities and gasoline.

     * In national CPI data, goods prices excluding fresh food rose 1.1% on year

in July following +1.0% in June. Overall goods prices rose 1.0% on year after

rising 0.9% in the previous month.

     * But service costs, which account for a little over half of the CPI

basket, fell 0.1% on year in July after falling 0.1% in June, hit by what the

BOJ sees as a temporary drop in mobile communications charges. The drop in

communications fees slowed from the previous month. Continued labor shortages in

some sectors are supporting prices for restaurants, housekeeping and medical

services while rents and imputed rents remain depressed.

     * July total energy costs +5.8% on year; June +4.9%

     * July total CPI foodstuffs excluding fresh food +0.9%; June +0.9%

     * July total CPI household durable goods unchanged; June -1.0%

     * July total CPI consumer electronics -4.0%; June -3.7%

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

[TOPICS: MAJDS$,M$A$$$,M$J$$$,MT$$$$]