Consumer price index (CPI) rises 2.3% in Japan

Cheaper gas fails to offset growing energy and food costs as CPI jumps 12th straight month


Japan's key consumer price index in September rose 2.3 percent from a year earlier for the 12th straight month of increase on growing energy and food prices, although gasoline prices showed clear signs of slowing their rise, the government said Friday.

The core nationwide CPI, which excludes volatile fresh food prices, stood at 102.6 against the base of 100 for 2005, the Ministry of Internal Affairs and Communications said in a preliminary report.

The pace of growth in the core nationwide CPI shrank by 0.1 percentage point from August, marking the first such drop since March, excluding a temporary decline logged in April following the expiration of a provisionally raised gasoline tax.

Energy prices as a whole grew 14.7 percent. Under the energy category, natural gas prices were up 6.0 percent and electricity prices rose 5.1 percent.

Petroleum product prices increased 23.7 percent with propane gas up 11.3 percent and kerosene up 50.3 percent.

Although gasoline prices rose 20.7 percent, the pace of growth represented a relatively sharp drop, compared with the 26.4 percent rise logged in August, and prices looked likely to decrease further in the coming months, a ministry official said.

Economic and fiscal policy minister Kaoru Yosano said there would be "a considerable time lag" until consumers can actually feel the benefit of a recent decline in crude oil prices, but called the current CPI level "healthy."

"The reason why crude oil prices declined is because the age of feverish oil buying came to an end," Yosano said at a press conference. "The outlook for global demand for crude oil seems to be weakening a bit."

The ministry also said nonperishable food prices rose 4.2 percent. Prices for cheese climbed 38.0 percent, spaghetti rose 33.5 percent, instant noodles 22.0 percent, and wheat flour 20.0 percent.

Yasunari Ueno, chief market economist at Mizuho Securities Co., said it was clear that the core CPI rise has peaked at 2.4 percent, which was logged in July and August. He said he expects the index to fall on a year-on-year basis at some point during the latter half of fiscal 2009, which ends in March 2010, due to deflationary pressures caused by an economic slowdown and a stronger yen.

"Excluding external shocks like rises in energy and food prices, there was no real inflation that results from an increase in wages," Ueno said.

"Falls in crude oil and grain prices as well as a stronger yen and deterioration in economic conditions are starting to have an impact," he said.