— See Separate Table For Details Of Individual Economist Forecasts

TOKYO (MNI) – Japan’s core consumer price index for May is expected
to show a 0.5% rise from a year earlier, posting the second consecutive
monthly y/y rise, following +0.6% in April, according to the median
forecast of economists polled by Market News International.

The Ministry of Internal Affairs and Communications will release
the CPI data at 0830 JST on Friday, July 1 (2330 GMT Thursday).

In April, core CPI, which excludes fresh food but includes energy,
showed the first y/y rise in 28 months.

The biggest contributor to the April rise was an end to the
depressing effect on the y/y change in consumer prices that came from
lower high school tuition costs.

As part of measures to support consumer spending, the government
began providing subsidies for both public and private high school
education in April 2010. The dampening effect on CPI lasted for 12
months through March this year, slashing core CPI by 0.49 percentage
point y/y every month until March.

But many economists said y/y growth of the May core CPI is expected
to have slowed somewhat from the April gain, as y/y gain in energy
prices decelerated.

The average retail price of regular gasoline in Japan rose 9.7% y/y
in early May, decelerating from +14.1% seen in the early April, data
released by the Oil Information Center showed.

Going forward, core CPI is expected to take a downward lurch in
August, when the government updates the CPI base year to 2010 from 2005
and reviews the basket of goods and services used for calculating the
main consumer price measure.

Economists expect the revamp of the data to push down the y/y
change in core CPI by 0.5 to 0.8 percentage point.

Revamp of the data five years ago pushed down the y/y change of
core CPI by 0.5 percentage point, much larger than economists’ outlook
of 0.2 percentage point, and that surprised the government bond market.

The MNI survey median forecast also showed that core CPI in central
Tokyo is expected to rise 0.2% y/y in June, after showing a preliminary
+0.1% in May and +0.2% in April, which was the first y/y rise in 25
months.

skodama@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4838 **

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