— Japan Nov Core CPI -0.5% Y/Y, 21st Drop In Row, But Above Oct -0.6%
— Japan Nov Total CPI +0.1% Y/Y, 2nd Y/Y Rise in Row
— Central Tokyo Dec Core CPI -0.4% Y/Y Vs Nov -0.5%, 20th Drop In Row
— Japan CPI Shows Nov Energy Costs +3.9% Y/Y Vs Oct +4.0%

TOKYO (MNI) – Japan’s national core consumer prices fell 0.5% in
November from a year earlier, posting the 21st straight y/y drop and
indicating that the economy is still mired in deflation, data released
Tuesday 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 from -0.6% in October, due largely to the
tobacco tax hike that took effect on Oct. 1.

Total national CPI, meantime, rose 0.1% in November from a year
earlier on higher costs for fresh vegetables, cigarettes and utilities,
marking the second straight monthly rise. In October, it posted 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 November, pushing up total CPI by 0.27 percentage point.

The November core CPI came in slightly better than the -0.6% median
forecast in an MNI survey of economists.

Continued sharp discounts on durable goods – refrigerators,
flat-screen TVs and personal computers — contributed to the core 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 November from a year
before, contributing -0.49 percentage point to the total CPI.

Overall energy costs in November rose 3.9% following a gain of 4.0%
in October.

Electricity costs were up 2.0% y/y in November vs. +3.0% in October
while city gas was up 6.1% vs. +6.8% the previous month. Prices of
refined petroleum products rose 5.0% in November following a +4.0% in
October, 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 +4.3% in November
from +2.7% in October, while the pace of increase in heating oil
accelerated to +12.4% in November from +12.3% in the previous month.

The average price of regular gasoline in Japan rose to Y133.7
($1.60) per liter, or $6.1 per gallon, last week from Y133.2 in the
previous week, posting the fourth straight weekly rise, according to
data released last week by the Oil Information Center.

The Bank of Japan has said high school tuition cuts, whose effect
on CPI will last 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 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% on average 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 fell 0.1% in
November after a gain of 0.4% in October, due chiefly to lower food
prices.

Meanwhile, central Tokyo core CPI fell 0.4% year-on-year in
December, the 20th straight y/y drop, but a slight improvement from
-0.5% in November.

The December decline was 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 4.2% y/y in December vs. +3.9% in
November while kerosene was up 10.1% in December vs. +7.9% in the
previous month.

Overall energy costs in the area rose 3.2% y/y in December, down
from +4.1% in November

Month-on-month, core central Tokyo CPI fell 0.1% in December after
dipping 0.1% in November.

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): November -0.9% vs October -0.8%, the 23rd straight on-year drop.

Tokyo CPI excluding food and energy (y/y): December -0.5% vs
November -0.6%, in negative territory for the 24th straight month.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4835 **

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