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By Hiroshi Inoue
     TOKYO (MNI) - Bank of Japan officials are shrugging off the slowdown in the
key inflation indicator in April and are still counting on the effects of
expected price hikes by more firms in the fiscal year that began last month, MNI
     The slower pace of year-on-year increase in the core consumer price index
(excluding fresh food) in April came as no surprise to BOJ officials as the core
CPI in central Tokyo, the leading indicator of the national data, had already
shown a slowdown to +0.6% in April from +0.8% in March.
     The year-on-year rise in the core CPI decelerated to 0.7% in April from
+0.9% in March on lower year-on-year increases in the prices for electricity,
mobile phones and hotels.
     The 16th straight year-on-year rise in April continued to be led by
gasoline and medical services.
     Prices are slow to respond to the modest economic recovery but the BOJ
board is likely to maintain its view that the momentum toward the 2% price
stability target is maintained on the assumption that the positive output gap
will continue widening, exerting upward pressure on prices, a person who is
familiar with BOJ thinking told MNI.
     The person added that BOJ officials are focused on how consumer prices will
be affected by corporate annual price revisions in April onward.
     BOJ officials are encouraged by the recent upward move in the prices for
eating out (+0.9% on year in April vs. +0.7% in March and +0.6% in February) as
the food service industry has been under pressure from rising materials and
labor costs to raise prices.
     The consensus among BOJ officials is to be hopeful but cautious at the same
     BOJ officials don't expect the pace of a pickup in consumer prices to
accelerate sharply anytime soon but they expect to see a gradual rise.
     Another person who is familiar with BOJ thinking said some companies that
are facing a limit to absorbing high costs are gradually raising their retail
prices while others are refraining from raising prices by boosting labor
     Goods prices excluding volatile fresh food prices rose 1.3% on year in
April, with the pace of increase slowing from +1.6% in March.
     The pace of increase in overall goods prices decelerated sharply +1.0% in
April from +2.0% in March as the prices for fresh food eased after surging late
last year and staying high until recently.
     The prices for processed food (canned food, bread, snacks, beverages,
etc.), which accounts for about 15% of the total CPI, rose 1.0% on year in April
after rising at the same pace in March.
     BOJ data released Monday showed that the year-on-year rise in the corporate
goods price index, the key indicator of producer prices, continued to slow to
2.0% in April from 2.1% in March and 2.6% in February. In the CGPI, the prices
for domestic durable goods fell 1.1% on year in April, down further from -0.7%
in March.
     This indicates that corporate price hikes have been limited so far because
firms are cautious about raising retail prices amid sluggish private
consumption, the BOJ views.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: