Core consumer inflation in Tokyo accelerates at fastest pace in 8 years

Core consumer prices in Tokyo jumped 2.6 percent in August from a year earlier, marking the fastest pace of gain in about eight years, government data showed Friday, fresh evidence of inflationary pressures from higher energy and food prices aggravated by a weak yen.
The figure in Tokyo, staying above the Bank of Japan's 2 percent target for the third straight month, is seen as a leading indicator of what to expect nationwide. Some economists expect the core consumer price index, excluding volatile fresh food items, across the nation to rise over 3 percent before year's end.
Tokyo's core CPI last saw a 2.6 percent rise in October 2014. Stripping away the effects of a consumption tax hike, the rise is the biggest since June 1992, the Ministry of Internal Affairs and Communications said. Tokyo has seen core consumer inflation accelerating for the 12th straight month.
The rising inflationary trend, however, is unlikely to change the BOJ's stance of keeping its ultralow rate policy anytime soon, given that its board members believe the recent bout of commodity inflation will only be temporary and monetary easing is needed to support the economy of the resource-scarce nation facing downside risks.
The BOJ's dovish stance is in stark contrast with its global peers, including the U.S. Federal Reserve and the European Central Bank, which have already been tightening their policies to tame soaring inflation. BOJ board member Toyoaki Nakamura said Thursday now is not the right time for the BOJ to join the global "rate-hike competition," adding that the central bank will spur wage growth by persisting with monetary easing.
By item, energy prices surged 25.6 percent from a year ago. Excluding perishables, food prices gained 3.8 percent, and more price hikes are expected in the coming months as Japanese companies plan to pass on higher costs, economists say.
The recent rise in core consumer inflation is partly because the year-on-year effect of sharply lower mobile data fees has begun to fall out of the data. The nationwide core CPI gained 2.4 percent in July, marking the sharpest rise in seven and a half years.
The government has been trying to lower retail gasoline and kerosene prices by providing subsidies to wholesalers and limiting the rise in the price of imported wheat that it sells to millers. Japanese Prime Minister Fumio Kishida has instructed officials to draw up a new inflation relief package by early September to ease the pain on households.
The pace of gain in inflation has varied from region to region due partly to differences in the weight applied to items based on such factors as the value and frequency of purchases.
Those in the northeastern region of Tohoku and Hokkaido -- areas where energy consumption is high due to low winter temperatures -- have seen bigger gains in the core CPI than those in the west, according to the government data for July. The city of Akita reported the biggest gain of 3.8 percent, while the city of Wakayama in western Japan saw the lowest rise of 1.5 percent.
"The effect of higher gasoline prices is felt more in areas where access to public transport is limited, and cars are the main means of transportation," said Naoko Ogata, a senior economist at the Japan Research Institute, adding that retailers, such as supermarkets, are more likely to raise prices in thinly populated areas.

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