— Japan Oct Core CPI -0.6% Y/Y, 20th Drop In Row, But Above Sep -1.1%
— Japan Oct Total CPI +0.2% Y/Y, 1st Rise Since Dec 2008
— Central Tokyo Nov Core CPI -0.5% Y/Y Vs Oct -0.5%, 19th Drop In Row
— Japan CPI Depressed By Lower Prices for Tuition, Electronics
— Japan CPI Shows Oct Energy Costs +4.0% Y/Y Vs Sep +3.7%

TOKYO (MNI) – Japan’s national core consumer prices fell 0.6% in
October from a year earlier, posting the 20th straight y/y drop and
indicating that the economy is still mired in deflation, data released
Friday by the Ministry of Internal Affairs and Communications showed.

But the pace of decline in the core CPI — excluding fresh food but
including energy — slowed sharply from -1.1% in September, due largely
to the tobacco tax hike that took effect on Oct. 1.

Total national CPI, meantime, rose 0.2% in October from a year
earlier on higher costs for fresh vegetables, cigarettes and utilities,
marking the first y/y rise since +0.4% in December 2008.

The tax hike raised cigarette prices 38.6% on year at the national
level in October, pushing up total CPI by 0.27 percentage point.

The October core CPI came in slightly below the -0.5% median
forecast in an MNI survey of economists.

Continued sharp discounts on durable goods — heaters/air
conditioners, flat-screen TVs and personal computers — contributed to
the price drop, overwhelming year-over-year gains in costs for tobacco
as well as gasoline and heating oil.

Core CPI has shown widespread declines in prices of goods and
services as retailers cut prices to lure cautious customers. In
addition, technological advances has made higher quality products
available at the same or lower prices.

High school tuition costs fell 17.4% in October from a year before,
contributing -0.49 percentage point to the total CPI.

Utility charges showed a year-on-year rise in October, pushed up
by the third straight y/y rise in electricity charges (August’s rise
was the first in 16 months) and a further gain in city gas bills.

Overall energy costs in October rose 4.0% following gains of 3.7%
in September and 4.3% in August.

Electricity costs were up 3.0% y/y in October vs. +2.8% in
September while city gas was up 6.8% vs. +5.0% the previous month.

Prices of refined petroleum products rose 4.0% in October, the same
growth rate as in September, but slower than +7.0% in August, +7.8% in
July and +12.3% in June.

The y/y rise in gasoline prices was faster at +2.7% in October,
compared with +2.3% in September, while the pace of increase in heating
oil decelerated to +12.3% in October from +13.3% in the previous month.

The Bank of Japan has said high school tuition cuts, whose effect
on CPI will for 12 months from last April, should be excluded when
gauging the consumer price trend.

The BOJ has also said that the year-on-year rate of decline in the
core CPI is expected to slow as the negative output gap — excess
capacity vs. slack demand — continues to shrink gradually. The bank’s
board expects the core CPI to rise 0.1% in fiscal 2011 after two years
of declines.

The government also expects the CPI to start rising on a
year-on-year basis in fiscal 2011 and seeks to achieve an average 1%
rise in prices through fiscal 2020. Unlike some other countries, Japan’s
government and central bank do not set a common inflation target.

On a month-over-month basis, the core national CPI rose 0.4% in
October after being unchanged in September, due chiefly to higher
tobacco prices.

Meanwhile, central Tokyo core CPI fell 0.5% year-on-year in
November, the 19th straight y/y drop, after falling at the same pace in
October.

The 0.5% y/y drops in October and November were the smallest since
the unchanged reading in April 2009. It was the smallest drop during the
current downtrend that began with -0.7% in May 2009 and bottomed out at
-2.2% in October 2009.

Tokyo-area gasoline and heating oil prices continued to rise from
year-earlier levels. Gasoline rose 3.9% y/y in November vs. +3.2% in
October while kerosene was up 7.9% in November vs. +10.5% in the
previous month.

The overall energy cost in the area rose 4.1% y/y in November, down
from +5.2% in October.

Month-on-month, core central Tokyo CPI fell 0.1% in November
after rising 0.4% in October, snapping a three month streak of
increases.

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): October -0.8% vs. September -1.5%, the 22nd straight on-year
drop.

Tokyo CPI excluding food and energy (y/y): November -0.6% vs.
October -0.6%, in negative territory for the 23rd straight month.

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

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