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Japan's core consumer prices stay flat in June after 2-month fall

People wearing face masks look at shoes at a store on July 15, 2020, in Tokyo. (AP Photo/Eugene Hoshiko)

TOKYO (Kyodo) -- Japan's core consumer prices were flat in June from a year earlier due to the continued impact of the novel coronavirus pandemic, but improved from two straight monthly declines, government data showed Tuesday.

    The nationwide core consumer price index, excluding volatile fresh food items, stopped falling mainly because the pace of decline in the price of gasoline slowed. But the index remained far below the Bank of Japan's 2 percent inflation target.

    The price of gasoline dropped 12.2 percent in the reporting month but the decline slowed from 16.4 percent in May as crude oil prices rose following a pickup in global demand, the Ministry of Internal Affairs and Communications said.

    "The slowdown largely supported the overall prices in June," a ministry official said.

    But the impact of a rebound in crude oil prices may fade down the road, the official said.

    "Crude oil prices have recently climbed, but lower oil prices (in the first half of this year) will translate into lower electricity and gas prices in the coming months and offset price hikes caused by higher oil prices," the official said.

    Among prices dented by the pandemic, accommodation fees fell 6.6 percent due to weak travel-related demand as people refrained from actively going out even after the government fully lifted a nationwide state of emergency in late May, while foreign tourists were banned from entering Japan.

    Prices of overseas package tours were down 7.1 percent amid the virus outbreak, while highway tolls rose 9.4 percent as operators halted offering holiday and weekend discounts until June 14 before requests for avoiding traveling across prefectural boarders were removed.

    Mobile phone fees were up 1.6 percent while electricity and gas prices declined 1.6 percent and 2.7 percent, respectively.

    "It will take a long time for consumption to recover to pre-pandemic levels as people remain cautious about the virus spread amid a recent increasing number of infections in major cities," said Takeshi Minami, chief economist at the Norinchukin Research Institute.

    "Downward pressure on prices will possibly be stronger as weak demand is expected to be prolonged while companies may cut salaries and bonuses due to worsening earnings," he added.

    So-called core-core consumer prices, which exclude fresh food and energy items, rose 0.4 percent from a year earlier.

    Excluding the impact of a consumption tax hike to 10 percent from 8 percent and a free preschool education and nursery program, both introduced on Oct. 1, consumer prices dropped 0.4 percent, compared with a 0.6 percent fall in May.

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