MNI BRIEF: Japan's Feb Core CPI Rises 3.1% Vs 4.2% In Jan
The year-on-year rise of Japan's annual core consumer inflation rate, as Bank of Japan officials expected, slowed to 3.1% y/y in February from January’s 4.2% due to government subsidies to lower utility charges, data released by the Ministry of Internal, Affairs and Communications showed Friday.
The BOJ expects the year-on-year rise in core CPI to fall below 2% toward the middle of fiscal 2023, but some board members see stronger-than-expected core CPI moves.
The underlying inflation rate measured by the core-core CPI (excluding fresh food and energy) rose 3.5% y/y in February from January's 3.2%. February’s smaller rise was caused by lower energy costs (a decrease of 0.7% y/y vs a 14.6% rise in January). The drop of crude oil price was also behind lower core CPI.
The contribution from energy on the CPI stood at -0.06 percentage point vs. +1.17 pp in January. Prices excluding perishables rose 7.8% y/y in February vs. a 7.4% rise in January and its positive contribution widened to 1.76pp from 1.66pp.
Prices for processed foods, accounting for 15% of the total CPI and which BOJ officials focus on given the sensitivity to economic activities, rose 8.1% in February vs a 7.7% increase in January, indicating pass-through of cost increases might have peaked out.
The focus has shifted to services prices, which will rise further as prices are directly linked to wages. Prices for eating out rose 7.2% in February vs. a 6.5% increase in January, showing firms are transferring high costs to retail prices.