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Japan's core CPI down 0.6% in Jan., but pace of fall eases

People wearing face masks to protect against the spread of the coronavirus walk down a street in Tokyo, on Feb. 17, 2021. (AP Photo/Koji Sasahara)

TOKYO (Kyodo) -- Japan's core consumer prices dropped 0.6 percent from a year earlier in January, dragged down by falling energy prices, but downward pressure eased due to a suspension in the country's tourism sector-reviving pandemic subsidy program, government data showed Friday.

    Nationwide core consumer prices, excluding volatile fresh food items, marked the sixth straight month of decline after falling 1.0 percent in December at the fastest pace in a decade, according to the Ministry of Internal Affairs and Communications.

    The latest consumer price index data shows the price trend remains weak in Japan, underscoring the difficult challenge facing the Bank of Japan as it pursues its 2 percent inflation target.

    The coronavirus pandemic has made the goal even more elusive, raising the likelihood that monetary easing will be maintained for an extended period.

    Reflecting lower crude oil prices in recent months, energy prices in general dropped 8.6 percent from a year ago in January. By item, kerosene prices slumped 14.4 percent while gasoline dropped 9.5 percent.

    Fees for hotels and other accommodation facilities were down 2.1 percent. The fall, however, was limited compared with a 33.5 percent year-on-year slump in December.

    The government's "Go To Travel" program, aimed at reviving the pandemic-hit domestic tourism sector, has been suspended since late December, taking some of the downward pressure off the CPI. A second state of emergency was declared in early January for urban areas with surging coronavirus cases.

    "We saw a smaller fall (than in December) with the impact of lower accommodation fees under the Go To Travel program disappearing," a ministry official said.

    "On the energy front, crude oil prices are rising now so this should be reflected in gasoline, electricity and gas prices with a lag. We expect the prices to stop falling," he added.

    As people spent more time at home amid the pandemic and purchased new household items, prices of durable goods gained 3.1 percent, the data showed. Such items include air filtration systems, air conditioners and microwaves.

    "The CPI is more or less flat absent special factors like the Go To Travel initiative, and we have not entered a phase of deflation," said Yuichi Kodama, chief economist at the Meiji Yasuda Research Institute. "The BOJ does not need to take additional steps."

    Many economists say a resumption of the travel discount program and the lowering of data usage fees in the coming months by major Japanese mobile carriers under government pressure to cut prices are expected to drag on the CPI.

    "The mobile fee cuts will be negative for the CPI but it's unlikely that price-cutting will spread to a wider variety of products because demand is expected to pick up as the pandemic subsides," Kodama said. "That said, it's difficult to expect the CPI will continue to rise, either."

    The pandemic has revived fears of Japan reverting to deflation, a view dismissed by BOJ Governor Haruhiko Kuroda. The BOJ is conducting its review of the current policy tools with an eye to making monetary easing more effective and sustainable and achieving the 2 percent goal.

    Kuroda said earlier this week that hitting the target will be difficult even in 2023, the year when his current term as the chief of the Japanese central bank expires.

    So-called core-core consumer prices, which exclude fresh food and energy items, were up 0.1 percent in January from a year earlier, marking the first rise in six months.

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