MNI POLICY: Japan Mar CPI Rise Slows; Seen Weaker in April

By Hiroshi Inoue

     TOKYO (MNI) - Japan's core consumer price index decelerated in March and

inflation is expected to weaken further in coming months as crude prices fall

and private demand dips.

     Japan's core CPI rose 0.4% y/y in March, a 39th straight gain, although the

pace decelerated from 0.6% in February. The outcome was in line with the MNI

median forecast of +0.4%.

     The slowing CPI was due to weaker energy items (-1.7% y/y in March vs.

-0.2% in February) and weaker goods prices (+0.9% in March vs. +1.0% in

February). The negative contribution from energy item rose to -0.13 percentage

point from -0.01 pp in February.

     The positive contribution from goods prices excluding perishable foods fell

to +0.42 pp from +0.58 pp in February. Prices for goods excluding perishable

foods rose 0.9% in March, slowing from +1.3% in February.

     --SOLID PROCESSED FOODS, SERVICES

     Prices for processed foods, accounting for 15% of the total CPI on which

BOJ officials focus, rose 1.2% in March following a 1.4% gain February.

     Service prices rose 0.8% y/y in March, accelerating from 0.7% in February

and prices for eating out, another key BOJ focus, remained firm, up 3.2% in

March following +3.3% in February.

     The core-core CPI excluding fresh food and energy items which BOJ officials

focus on to gauge the underlying trend rose 0.6% y/y in March, unchanged from

+0.6% in February, for the 33rd straight rise.

     --CORONAVIRUS IMPACT WORRY

     Despite the solid prices, bank officials see service prices and prices for

eating out slowing in the coming months as people stay home in the fight against

COVID-19. 

     Sales at restaurants and department stores and in the transport sector are

falling following the drop in foreign tourists to Japan, and profits continued

to decline which in turn will lower retail prices.

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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