— Japan Core CPI Posts 14th Straight Y/Y Drop
— Central Tokyo May Core CPI -1.6% Y/Y Vs Apr -1.9%
— Drop In High School Tuition Prompts Faster Apr Japan CPI Fall
— Electronics Continue To Lead Japan CPI Declines
— Japan Overall Energy Costs Post Higher Y/Y Rise In April Than March

TOKYO (MNI) – Japan’s core consumer inflation rate fell to -1.5%
in April, the 14th straight year-on-year drop, with retail discounts
overwhelming higher energy costs, data from the Ministry of Internal
Affairs and Communications released on Friday showed.

The pace of decline accelerated from -1.2% in March, as widely
expected, due to a drop in high school tuition after the government
began providing subsidies at the start of the new fiscal year as part of
its economic stimulus measures to support households.

Continued sharp discounts on durable goods — heaters/air
conditioners, flat-screen TVs and personal computers — led the price
drop, overwhelming a year-over-year rise in gasoline and heating oil
costs.

High school tuition fell 17.4% in April from a year before,
contributing -0.48 percentage point to the year-on-year drop of -1.2% in
the overall CPI (core plus fresh food).

Utility chargers still showed a year-on-year drop but overall
energy costs posted a 0.6% rise in April, up from a small 0.1% gain in
March.

The pace of the year-on-year rise the prices of refined petroleum
products accelerated further in April to +13.2% from +12.0% in March.

The y/y rise in gasoline prices was faster at +17.0% in April,
compared with +16.4% in March, while the pace of increase in heating oil
also accelerated to +19.2% in April from +14.6% in the previous month.

The decline in utility charges was slightly faster in April, with
electricity down 9.4% y/y vs. -9.0% in March and city gas falling 10.6%
vs. -10.3% in the previous month.

The rate of deflation in March was below the record -2.4% rate in
August last year. However, after declining for four months in a row to
-1.3% in December last year, the pace of price drops changed little
through March this year, causing some concern that deflation may more
deeply rooted in Japan than previously thought.

The Bank of Japan has said the damping effects of high school
tuition cuts on year-on-year CPI changes that will last for 12 months
from April should be excluded when gauging the consumer price trend.

On a month-over-month basis, the core national CPI fell 0.3% in
April after rising 0.3% in March, posting the first m/m drop in three
months.

The decrease led by sharp drops in tuition both at public and
private high schools.

Even though energy costs have recovered from year-earlier levels,
core CPI, which excludes fresh food but includes gasoline and heating
oil costs, has shown wide-spread declines in prices of goods and
services as retailers cut prices to lure customers.

However, overseas holiday tours have now shown year-on-year gains
after contributing to overall CPI drops for many months.

Retail gasoline prices have shown sharp gains in recent weeks while
they have been on a gradual uptrend since mid-January 2009.

Meanwhile, core central Tokyo CPI fell 1.6% year-on-year in May
after falling 1.9% in April, posting the 13th straight y/y drop.

The pace of decline has fluctuated since the record drop of 2.2%
hit in October 2009.

As expected, sharp drops in high school tuition continued to lead
the decrease as the government began to provide subsidies in the new
fiscal year in order to ease the financial burden on many households.

In Tokyo, gasoline and heating oil prices continued to rise from
year-earlier levels but the overall energy cost still posted a y/y drop
of -1.0% in May, although the pace of decline decelerated sharply from
-7.9% in April.

Month-on-month, core central Tokyo CPI was unchanged in May after
falling 0.1% in April.

CPI figures date to 1970 under the current 2005 base year.

Other details from the latest data:

National CPI excluding food and energy, or the U.S. style core CPI
(y/y): Apr -1.6% vs. Mar -1.1%, the 16th straight on-year drop.

Tokyo CPI excluding food and energy (y/y): May -1.4% vs. Apr -1.4%,
in negative territory for the 17th straight month.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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