February 1, 2014 7:00 am JST

Prices in Japan rising across broad range of sectors

SHUHEI KATO, Nikkei staff writer

TOKYO -- Japanese consumer prices are climbing for a wider array of products as a weaker yen pushes up energy costs and a last-minute surge in demand before the sales tax hike puts upward pressure on durable goods prices.
 
   Data released Friday from the Ministry of Internal Affairs shows that in December, core consumer price index, which excludes volatile fresh foods but includes energy costs, rose 1.3% on the year. The full-year index for 2013 edged up 0.4%, the first year-on-year increase in five years. The figure came close to the 0.7% projection by the Bank of Japan for fiscal 2013, which ends in March.
 
   A major factor was higher gasoline and electricity prices as the weaker yen pushed up imported fuel costs. As businesses ask more for a broader range of items, however, the weight of energy in causing inflation is diminishing. In December, energy's contribution to lifting overall prices decreased to 0.59 point from 0.65 in November, despite the 0.1-point increase in the consumer price index.

   Men's bag maker Indeed Cran bumped up around 30% of its offerings by about 10% in the fall to pass on pricier cowhide. The firm says sales remain strong despite the higher price tags. Ministry data shows that the subindex for imported handbags jumped more than 30% on the year in December.

   Among consumer electronics, laptop and desktop computers are becoming dearer, on the back of strong demand before the sales tax rises from 5% to 8% in April. "Consumers are focusing more on high-end models, as low-priced PCs lose market share to tablets," said Eiji Mori, an analyst at research firm BCN.

   Groceries are also more expensive. In October, Megmilk Snow Brand effectively raised the price of its mainstay Neo Soft margarine series by trimming the content volume 6% while keeping the same price. Food makers often use this technique because consumers tend to pay more attention to prices than size when buying food.

   Ministry data excluding fresh foods shows that prices for 267 items rose in December, far surpassing the 188 items whose prices fell. There were substantial upward pressure from upstream sections of the distribution chain, with the corporate goods price index rising 2.5% in December on the year.

   Measured in gross domestic product, the Japanese economy as a whole still had supply capacity in excess of demand, but the gap narrowed for three consecutive quarters through the July-September period 2013.
 
   The Bank of Japan forecasts that the core CPI will increase 1.3% in fiscal 2014, excluding the impacts from the higher tax. But according to some private-sector economists, the pace of inflation will slow this year, as costlier imports would have less influence on overall prices should the yen stop weakening.

   "If the yen does not weaken further, then the growth in the CPI will decline starting in the spring," said Ryutaro Kono, chief economist at BNP Paribas Securities (Japan). The higher sales tax is likely to chill consumption temporarily, so businesses will have a harder time raising prices to simultaneously offset high material costs and the steeper tax. Price trends after the tax increase will have a major effect on the Bank of Japan in deciding whether to adopt additional easing.