By Noriyuki Suzuki,
Japan's core consumer prices rose 0.5 percent in December from a year earlier, driven by higher fuel costs and a weak yen that have threatened to cool consumer sentiment, government data showed Friday.
The nationwide core consumer price index has been in a tug-of-war between higher energy prices, including for crude oil, and sharply lower mobile data fees, which fell 53.6 percent in December following reductions by major carriers amid government pressure.
The headline figure marked the fourth straight month of year-on-year increase, according to the Ministry of Internal Affairs and Communications.
Stripping the drag from mobile communication fees, the core CPI rose close to 2 percent, a target set by the Bank of Japan.
In 2021, core consumer prices dipped 0.2 percent, marking the second straight year of decline, dragged down by the impact of cheaper mobile fees, the data showed.
Some economists say the core CPI could rise toward 2 percent in the coming months as the year-on-year mobile fee impact that began in the spring of 2021 is expected to dissipate while energy costs remain high.
That prospect puts the BOJ in a complex situation as it needs to maintain its ultraloose monetary policy for an extended period, while rising wholesale prices would cut into profitability and higher goods prices could prompt consumers to curb spending without strong wage growth.
In December, energy prices rose 16.4 percent from a year earlier, the fastest gain in over 13 years, also boosted by a weaker yen that inflates import costs. Kerosene prices jumped 36.0 percent and gasoline prices climbed 22.4 percent, according to the ministry data. Electricity bills increased 13.4 percent, the steepest rise since March 1981, reflecting higher crude oil prices.
"The rise in core consumer inflation was largely due to the energy impact," said Toru Suehiro, a senior economist at Daiwa Securities Co.
Suehiro expects the core CPI to increase between 1.5 percent and 1.8 percent in April, still shy of the BOJ's 2 percent target.
The core consumer inflation figure has been supported by higher accommodation costs since the suspension in late 2020 of the government's "Go To Travel" subsidy program to spur spending amid the coronavirus pandemic.
The so-called core-core CPI, which excludes both fresh food and energy items, fell 0.7 percent, down for the ninth month in a row.
Budding signs of inflation are not enough for the BOJ to consider changes to its accommodative monetary policy or hikes in interest rates as Governor Haruhiko Kuroda has said inflation led by higher commodity prices that is unaccompanied by wage growth will not be sustainable.
Companies already grappling with surging input costs are facing increasing pressure to consider pay rises for their workers, with Prime Minister Fumio Kishida stepping up calls for stronger wage growth as inflation is picking up.
BOJ board members acknowledged rising inflationary pressure in their Dec. 16-17 policy-setting meeting, minutes showed Friday.
"One member said that since producer prices continued to increase at a historically high pace, mainly on the back of the rise in raw material prices, the underlying upward pressure on consumer prices also seemed to have been increasing gradually," the minutes said.
