TOKYO -- Japan's consumer prices fell overall in August on cheap oil -- the first decline since the country's current round of monetary easing began in April 2013. But rising food costs held larger sway over consumers' economic outlooks.
The consumer price index excluding fresh food slipped 0.1% on the year in August to 103.4, data released Friday shows. The price of gasoline tumbled 17.8%, while electricity prices fell 5.1%.
Markets now see future inflation at less than 1%. Investors are growing more skeptical of the Bank of Japan's 2% inflation target, which the institution hopes to achieve by the April-September half of fiscal 2016.
But few in the market expect the CPI will continue to fall, plunging the country back into deflation. Items in the CPI basket rising in price outnumbered those falling by 339 to 131, signaling an upward trend in many sectors.
Food prices rose 2.7% overall as the cheap yen drove up raw materials costs. Global demand for tomato paste and other ingredients sent the cost on those products spiking. The rise led food producer Kagome to hike prices on its sauce products by 4-10% -- the first increase in 25 years.
Bread and snack maker Pasco Shikishima has raised prices on its products 2-5% since July. The average price on a six-slice loaf of Pasco white bread rose around 4% between January and August, Nikkei point-of-sale data shows, indicating that shipment price increases are being passed on to the consumer.
Prices are rising on other everyday goods as well. Drugstores are holding fewer sales for toilet paper, bringing prices on the item up 4.4% on the year for August.
Customers increasingly flocked to next-generation 4K television sets, giving the price index an upward nudge. Ultrahigh-resolution sets larger than 40 inches cost 211,600 yen ($1,743) on average during the first half of 2015 -- more than 2.5 times prices on other sets of the same size, survey company Gfk Japan said.
The UTokyo Daily Price Index, which tracks daily changes in prices on food and necessities, was up 1.5% on the year at the end of the month. Because prices on everyday goods are already rising, ordinary consumers see prices in general continuing to climb -- a marked contrast to investors' pessimism. Some 85% of households see prices rising in a year, a Cabinet Office survey shows.
Real wages crept up 0.5% on the year in July, though late payment of bonuses was largely responsible. It is unclear whether wage hikes sufficient to keep pace with higher prices will continue. If the rise in real wages stalls amid consumer expectations for higher prices, households could step up saving, stymying efforts to spur consumption. A further split in price trends between daily goods and the broader economy could prove trying as the government and central bank look to keep the economy on a recovery track.