— Japan Core CPI Posts 12th Straight Y/Y Drop
— Central Tokyo Mar Core CPI -1.8% Y/Y Vs Feb -1.8%
— Electronics Continue To Lead Japan CPI Declines
— Gasoline, Heating Oil Up But Overall Energy Costs Still Down

TOKYO (MNI) – Japan’s core consumer inflation rate fell 1.2% in
February, posting the 12th straight year-on-year drop after falling 1.3%
in January, with higher gasoline prices providing some support, official
data released on Friday showed.

But 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 (lower utilities still kept overall energy costs down).

The 1.2% drop in the core CPI was the smallest fall since -1.1%
marked in May 2009.

The pace of the year-on-year price drop slowed for the fourth month
in a row through December 2009 from -1.7% in November, -2.2% in October,
-2.3% in September and the record drop of -2.4% in August.

But in January this year the pace of shrinkage in y/y drops marked
time at -1.3%, causing some concern that deflation may more deep rooted
in Japan than previously thought.

In February the decline in overall energy costs decelerated further
to -0.3% y/y from -1.0% in January, -2.4% in December and -7.9% in
November.

This was due to a slightly faster y/y rise in the prices of refined
petroleum products in February at +11.5%, up from +10.9% in January, as
well as a smaller drop in utilities (electricity -9.4% y/y vs. -9.7% in
the previous month and city gas -11.2% vs. -11.9%).

The pace of y/y gains in gasoline prices actually slowed in
February but still posted a double-digit percentage rise of +17.8%
following +19.1% y/y in January and +8.3% in December.

Heating oil also contributed to supporting consumer prices, rising
8.2% y/y in February vs. +3.0% in January and -8.2% in December.

On a month-over-month basis, February core national CPI was
unchanged after falling for four months in a row. It followed a 0.6%
drop in January, which was the largest m/m drop since -0.6% marked in
January 2009.

Higher heating oil costs offset lower prices of women’s winter
clothing.

The 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 and although some
energy costs have recovered from year-earlier levels.

Retail gasoline prices have been fluctuating in tight ranges in
recent weeks while their longer-term uptrend since mid-January 2009
remains intact.

In the March 22 week, the average price of regular gasoline in
Japan rose to Y131.0 ($1.42) per liter, or $5.40 per gallon, from Y130.4
the previous week, posting the third weekly rise in a row. It was much
higher than Y111.5 marked a year ago.

Between October 2007 and December 2008, the core national CPI
posted year-over-year gains ranging from +0.1% to +2.4%, followed by two
months of unchanged readings.

In July and August 2008, the core index hit +2.4%, the fastest pace
of inflation since October 1997, but started to slide from there.
Excluding the effects of the April 1997 sales tax hike, the July-August
rate was the highest in about 16 years, since +2.5% in June 1992.

As the effects of record high gasoline prices marked in the summer
of 2008 fell out of the calculation, the core national CPI plunged last
year, hitting a record year-on-year drop of -2.4% in August 2009.

Meanwhile, core central Tokyo CPI fell 1.8% year-on-year in March
after dropping at the same rate in February and slowing from -2.0% in
January and the record drop of 2.2% hit in October 2009. It was the 11th
straight y/y drop.

Lower costs of overseas holiday tours and durable goods continued
to lead the decline in the area. Rents and women’s clothing also
contributed the drop in the latest month.

Gasoline prices continued to rise from year-earlier levels since
December (+16.4% y/y in March vs. +15.3% in February) and heating oil
was also up after turning positive in February (+7.7% in March vs. +3.4%
in February), but overall energy costs were still down by 7.6%, although
the pace of decline slowed from -8.5% in the previous month.

Month-on-month, core central Tokyo CPI rose 0.3% in March, up for
the second straight month, after +0.1% in February, which was the first
m/m gain in 11 months.

Higher prices of women’s spring and summer clothing as well as
markups in overseas holiday tours and airfares led the increase.

In September 2008, the central Tokyo core CPI hit +1.7%, matching
the 1.7% gain seen in March 1998. Excluding the effects of the 1997
sales tax hike, it was the highest in nearly 16 years, since the 1.9%
rise in December 1992.

But as seen in the national CPI, energy costs showed year-on-year
drops last year compared with record highs in 2008, sending the Tokyo
core CPI to a record drop of -2.2% in October 2009.

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

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

[TOPICS: M$J$$$,M$A$$$,MAJDS$,MT$$$$]