Japan June Core CPI Posts Modest Rise on Energy, Durable Goods

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

--Tokyo July Core CPI +0.2% Y/Y; MNI Median +0.1%; June Unchanged

     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 0.4% on year in June, as forecast by economists, marking the

sixth straight year-on-year rise after +0.4% in May and +0.3% in April. The

index posted the first rise in 13 months in January. The increase was led by

higher electricity charges but overall energy costs made a smaller contribution

to the core CPI than previously seen. The contribution of processed food and

household durable goods increased.

     * Year-on-year gains in overall energy costs are expected to support a

gradual rise in consumer prices but the increase in gasoline prices continues to

slow and firms remain cautious about raising retail prices for fear of losing

market share or denting private consumption.

     * The slow pickup in the CPI led the Bank of Japan board to revise down its

medium-term projections at its latest meeting on July 19-20. The board revised

down its median forecast for inflation rate in the current fiscal year to +1.1%

from +1.4% made in April, and pushed back the estimated timing of hitting the 2%

price stability target to "around fiscal 2019" from "around fiscal 2018."

     * 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) was unchanged on year in June, after being flat in May and April

and falling 0.1% in March.

     * In June, the year-on-year increase in gasoline prices slowed sharply to

+6.1% from +12.3% in May while electricity charges posted a 4.9% rise after

rising 2.5% in the previous month. Overall energy costs rose 4.9% on year in

June after rising 5.1% in May.

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

year-on-year rise after +0.4% in May, in the aftermath of markups for marine

products and beer as well as continued gains in energy costs.

     * The central Tokyo core CPI posted the first year-on-year rise in two

months, up 0.2% in July after being flat in June. The increase was led by higher

prices of air conditioners amid heat waves as well as utilities and gasoline.

     * In national CPI data, goods prices excluding fresh food rose 1.0% on year

in June following +0.9% in May. Overall goods prices rose 0.9% on year after

rising 0.8% in the previous month.

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

basket, fell 0.1% on year in June after being flat in May, hit by what the BOJ

sees as a temporary drop in mobile communications charges. Continued labor

shortages in some sectors are supporting prices for restaurants, housekeeping

and medical services while rents and imputed rents remain depressed.

     * June total CPI energy costs +4.9% on year; May +5.1%

     * June total CPI foodstuffs excluding fresh food +0.9%; May +0.8%

     * June total CPI household durable goods -1.0%; May -2.2%

     * June total CPI consumer electronics -3.7%; May -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

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