TOKYO (MNI) – Japan’s core consumer price index for April is
expected to show a 0.6% rise from a year earlier, which would be first
y/y rise in 26 months and the largest gain since +1.0% in November 2008,
according to the median forecast by economists polled by Market News
International.

The Ministry of Internal Affairs and Communications will release
the CPI data at 0830 JST on Friday, May 27 (2330 GMT Thursday).

The depressing effect of the year-on-year drop in high school
tuition costs resulting from government subsidies put in place in April
2010 lasted for 12 months through March this year, lowering core CPI by
0.49 percentage point y/y every month.

In addition to this depressing effect dropping out of the
year-on-year calculation, the core inflation reading — which excludes
fresh food but includes energy — is also being supported by a general
uptrend in gasoline and heating oil costs.

The average retail price of regular gasoline in Japan rose 14.0% in
April from a year before, with the rate of increase rising from +13.1%
y/y in March, Oil Information Center data showed.

In March, when the core CPI fell only 0.1% on year, gasoline prices
pushed up total consumer prices by 0.32 percentage point and the
positive contribution from energy costs, which also include utility
charges, came to 0.50 percentage point.

The spike in global oil prices in 2008 sent Japan’s inflation rate
to +2.4% in July and August that year, the fastest pace since October
1997. But as the effect of the year-on-year surge in energy costs waned,
core CPI plunged by a record 2.4% in August 2009.

Deflation measured by CPI eased only gradually through 2010.

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.

The MNI survey median forecast also showed that economists expected
a 0.2% gain from a year earlier in central Tokyo core CPI for May after
+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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