MNI: Japan Govt: CPI Rising Slowly, Not Hurting Spending

By Max Sato

     TOKYO (MNI) - Japan's government on Friday revised up its view on inflation

for the first time in nearly three years but a Cabinet Office official said the

drag from a spike in fresh food prices on consumption should be temporary.

     In its monthly economic report for March, the government left its overall

economic assessment unchanged after upgrading it in January, saying the economy

is "recovering moderately."

     Based on the increase in the year-on-year change in the core-core CPI

(excluding fresh food and energy) to 0.4% in January from 0.3% in December, the

government said consumer prices "have been rising gradually," instead of being

flat.

     The last upward revision was in May 2015, when the government also changed

its view to a "gradual rise" from being "flat." That assessment continued until

May 2016.

     "Real wages are down because of a higher rise in the total CPI, up 1.4% on

the year in January, which was due to higher gasoline and vegetable prices. But

it is temporary and not pushing down consumption," Hideyuki Ibaragi, director of

macro-economic analysis at the Cabinet Office, told reporters.

     Higher prices are seen in wide areas from processed food and durable goods

to hotels and home delivery fees, he said.

     Labor shortages have pushed up wages in some sectors while raw materials

costs have risen on stronger demand as well as poor crops and catches and the

yen depreciation in 2016 has led to higher import prices, he said. The

government has also lifted medical costs paid by seniors and has raised taxes on

alcohol beverages, he added.

     The government will analyze the results of annual wage talks between major

firms and unions for fiscal 2018 starting in April after the  Japanese Trade

Union Confederation (Rengo) releases its survey of member unions late on Friday.

     Asked to comment based on responses from some major automakers and

electronic firms, Ibaragi said, "Many firms are raising wages for the fifth

straight year. Improving employment and income conditions are good for the

economy."

     The Cabinet Office's Private Consumption Integrated Estimates index, which

is based on both supply- and demand-side data, was flat on the month in January,

hit by persistently high fresh food prices and the severe winter weather. It

followed a 1.0% slump in December and a 1.6% rise in November.

     The government maintained its views on key components of the economy:

private consumption and exports are "picking up" while business investment and

factory output are "increasing moderately."

     Looking ahead, the government maintained its outlook that the economy will

continue "recovering moderately," backed by an improvement in labor and income

conditions and the effects of fiscal spending.

     It also repeated the risks to its outlook, citing uncertainty in overseas

economies and the effects of fluctuations in financial and capital markets.

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

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