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MNI POLICY: Tokyo Apr Core CPI Lower on Phone Charges

--Tokyo April Core CPI Falls 0.2% Vs. -0.1% in March

MNI (Sydney)
TOKYO (MNI)

The drop in the Tokyo core inflation rate widened as expected in April due to lower mobile phone charges, falling 0.2% y/y for the ninth straight month and widening from -0.1% in March.

The Tokyo core CPI was strongly weighed down by weaker prices for mobile phone charges (-26.5% in April vs. +1.9% in March), although the negative contribution from energy items fell to -0.24 pp in April from 0.41 pp in March.

The negative contribution from mobile phone charges was within the Bank of Japan's estimate of around 0.5 to 1.0 pp.

The BOJ board's median forecast for the inflation rate this fiscal year is +0.1%, revised down from +0.5% in January and will be maintained if the price underlying trend remains solid.

The BOJ has said that the CPI is expected to be slightly negative for the time being and the bank also warned that CPI is likely to revised down due to the change in base year from 2015 to 2020.

However, bank officials expect the negative contribution from energy items to wane in or after April (-0.24 pp vs. -0.41 pp in March), increasing upward pressure on CPI.

Core inflation in the capital fell 0.1% y/y in April and points to a lower nationwide inflation rate with the core number likely to fall from March's -0.1%. April data is due to be released on May 21.

CORE-CORE CPI FALLS

Core-core CPI, which excludes fresh foods and energy and is the BOJ's key inflation indicator, was unchanged y/y in April, slowing from +0.3% in March.

Processed food prices, which account for 15% of the total CPI that BOJ officials are focused on, fell 0.2% y/y in April, unchanged from -0.2% in March.

Prices for accommodation rose 3.1% y/y in April, widening from a 1.9% rise in March.

Service prices fell 0.5% in April, reversing from +0.1% in March while prices for eating and drinking services were unchanged from a year earlier in April, after being unchanged in March.

MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com
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MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com
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