REPEAT:MNI 5 THINGS: May Tokyo CPI Rise Slows on Durable Goods

     TOKYO (MNI) - Consumer prices in central Tokyo, a leading indicator of the

national average inflation rate, continued to post a slower pace of increase,

hit by both temporary factors and weaker consumer confidence that is keeping

some firms from raising prices, data from the Ministry of Internal Affairs and

Communications released Friday showed.

     This indicates the year-over-year rise in the national CPI may slow down

further in May from a 0.7% rise in April in data due on June 22, clouding the

prospects for the Bank of Japan's anchoring inflation around its 2% target in

the next few years.

     The key points from the latest Tokyo CPI data:

     * The Tokyo core consumer price index (excluding fresh food) rose 0.5% on

year in May, coming in lower than the MNI median economist forecast for +0.6%.

It was the ninth straight y/y rise but the pace of increase continued to

decelerate from +0.6% in April, +0.8% in March and a recent peak of +0.9% in

February.

     * The largest factor was a 4.7% drop y/y in household durable goods in May,

compared with a 0.1% rise in April. New models of air conditioners were yet to

be released this year while their prices rose a year before due to a faster

product cycle at the time. The prices for overseas holiday tours also slowed in

May as they had already risen in April, reflecting strong demand for traveling

to Europe.

     * "There are temporary factors that contributed to the slowdown in the

year-on-year increase in the CPI. The latest figures do not necessarily suggest

that prices will continue to show a slower pace of gains in the coming months,"

a ministry official told MNI.

     * Retail price hikes have gradually spread in light of labor shortages and

higher materials costs but the move has been slow amid sluggish growth in real

wages. 

     * The core-core CPI (excluding fresh food and energy) -- a key indicator of

the underlying trend of inflation -- rose 0.2% on year in May in Tokyo, also

slowing from +0.3% in April and +0.5% in March.

     * The prices of goods excluding volatile fresh food rose 0.8% on year in

May, with the pace of increase decelerating from +1.0% in April. Service prices

remained depressed, rising 0.3% on year in May after rising at the same pace in

the previous month.

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