Japan's core CPI rises 0.2% in June, helped by energy prices

TOKYO (Kyodo) -- Japan's core consumer prices rose 0.2 percent in June from a year earlier as higher energy prices more than offset the impact of falling mobile phone fees, government data showed Tuesday.

Nationwide core consumer prices, excluding volatile fresh food items, gained for the second straight month following a 0.1 percent rise in May, according to the Ministry of Internal Affairs and Communications.

The core CPI, a gauge of inflation, is still far from the Bank of Japan's 2 percent inflation target, but prices gaining, albeit only slightly, will be a relief to policymakers.

Major gainers were in the energy segment, with kerosene prices surging 21.4 percent and gasoline jumping 17.9 percent. Overall petroleum products gained 14.8 percent.

Mobile communication fees plunged 27.9 percent from a year earlier, as major operators began to offer cheaper plans for data usage in the face of mounting government pressure.

"The increase in energy prices reflecting higher crude oil prices is a major factor (behind the rise in the core CPI)," a ministry official said.

"It's hard to say how prices will move but we will have to closely monitor the crude oil supply situation and how it will affect prices," the official said.

The Organization of the Petroleum Exporting Countries and nonmember countries have agreed to phase out production cuts as crude oil prices have been surging.

Japan's inflation situation is in stark contrast with the United States and some European nations, where inflationary pressures are increasing in line with the reopening of their economies following COVID-19 vaccinations.

For the current business year through next March, the BOJ expects the core CPI to rise 0.6 percent from a year earlier.

"We can't find domestic factors driving the CPI higher, it's all external ones," said Toru Suehiro, a senior economist at Daiwa Securities Co.

So-called core-core consumer prices, excluding fresh food and energy items, decreased 0.2 percent in June from a year earlier for the third straight month of fall, the ministry data showed.

Governor Haruhiko Kuroda said last week that the bank will closely monitor the impact of rising raw material costs, which vary among sectors.

"Exporters can absorb rising costs but firms relying on domestic demand, which are still struggling amid the pandemic, may not be able to," Suehiro said. "Coupled with the impact of the weak yen, the impact on the economy as a whole will be negative."