Consumer inflation in Japanese capital rises, Ukraine crisis adds pressure

  • Tokyo headline CPI in February up 1.0%, highest since December 2019
  • Feb. Tokyo core CPI up 0.5% yr vs. f’cast +0.4%
  • Core CPI rises faster than January’s 0.2% gain
  • Increase largely due to 24.2% rise in energy costs

TOKYO, Feb 25 (Reuters) – Consumer price inflation in the Japanese capital accelerated in February to the fastest annual rate in more than two years, suggesting soaring fuel and food prices will weigh consumption and the country’s fragile economic recovery.

Analysts expect the crisis in Ukraine to further push up inflation in the coming months due to a spike in global energy and commodity prices, which will add to the woes of the Japanese economy. , which is highly dependent on raw material imports.

“Import costs were already rising, so any further rise in commodity prices from the Ukraine crisis would be a major blow to Japanese consumption and corporate profits,” said Yoshiki Shinke, chief economist at the Dai- ichi Life Research Institute.

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The headline consumer price index (CPI) for Tokyo, seen as a leading indicator of national trends, rose 1.0% in February from a year earlier, marking the fastest pace since December 2019 , according to government data released on Friday.

Tokyo’s core CPI, which excludes volatile fresh food but includes energy costs, rose 0.5% in February from a year earlier, following a 0.2% gain in January. It compares to a median market forecast for a gain of 0.4%.

A 24.2% spike in energy prices was the main driver behind the rise in core CPI, underscoring the pain rising fuel costs are inflicting on households and retailers.

Prices also rose for a range of foods and services, although the increase was moderated by a temporary slowdown in reductions in mobile phone charges, the data showed.

“If energy prices continue to rise, Japan’s core CPI could hit 2% in April and not slow down much thereafter,” Shinke said.

International benchmark Brent crude prices surged above $105 a barrel after Russia, one of the world’s top oil producers, attacked Ukraine. Read more

Prime Minister Fumio Kishida said the government was ready to take further steps to reduce fuel costs, in addition to the subsidies already in place, to cushion the blow to households.

But there is uncertainty about the extent to which these measures could support consumption, with rising raw material costs already driving up the prices of various groceries, including snacks, soy sauce and coconut oil. cooking.

Japan’s economy recovered from the initial blow of the COVID-19 pandemic on the back of robust global demand, although the brakes on economic activity to combat rising cases of the new Omicron variant weighed on the consumption.

Sluggish consumption and weak wage growth have discouraged businesses from passing on rising costs to households, keeping consumer inflation away from the central bank’s 2% target.

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Reporting by Takahiko Wada and Leika Kihara; Editing by Leslie Adler and Sam Holmes

Our standards: The Thomson Reuters Trust Principles.

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