Tokyo inflation stays near zero after emergency ends

Tokyo inflation failed to gain momentum in June as virus fears continued to weigh on consumers even after a nationwide state of emergency was lifted.
Tokyo’s consumer prices excluding fresh food, a leading indicator of national inflation, rose 0.2%, the same pace as in May, the ministry of internal affairs reported Friday.
The result matched a forecast by economists.
Slumping prices for hotels and supplementary education weighed on inflation.
Smaller declines in energy costs lent support, along with a slight rise in cell phone fees.
Weak prices in the capital even after the government lifted its state of emergency late last month suggests any rebound in national inflation is likely to be slow, especially given the risk of new infection flareups.
Across Japan, core consumer prices fell 0.2% for a second month in May.
Smaller bonuses for workers this year are likely to be a key factor keeping downward pressure on prices, said economist Takeshi Minami at Norinchukin Research Institute. “If there’s no second virus wave, spending will gradually recover, but we’ll continue to see consumption remaining depressed, and prices won’t rise,” he said.
Bank of Japan governor Haruhiko Kuroda last week acknowledged price momentum has been lost and said it will likely be several years before the BoJ is able to raise interest rates.
While a recent pickup in the oil market helped soften downward pressure on Tokyo prices in June, uncertainty remains as the pandemic continues to spread globally.
Tokyo virus cases have jumped in recent days, which could also keep domestic sentiment depressed. “Looking forward, a decline in prices of daily necessities may weigh on the core gauge in July. Beyond that, with a double-digit decline in GDP likely in 2Q, a negative output gap is likely to add to downward pressure on inflation in 3Q,” Bloomberg’s economist says.
Tokyo hotel prices dropped 6.6% versus the prior year.
The cost of supplementary education fell 4.7% after previous gains.
Year-on-year declines in gasoline prices eased in June to 10.7% from 15.6% in May.
Excluding both fresh food and energy, Tokyo prices rose 0.4% from a year earlier, slowing from 0.5% in May.
The result matched the forecast.
Overall price growth slowed to 0.3%, also matching the analysts’ median estimate.

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