TOKYO ⸺ Tokyo consumer prices fell unexpectedly in April due to cuts in mobile phone fees by major carriers, government data showed on Friday, making the central bank’s 2% inflation target appear even more elusive.
Major carriers have come under intense pressure from Prime Minister Yoshihide Suga, who has called for mobile phone fees to drop by as much as 40%, arguing that Japan’s cellphone fees, among the world’s most expensive, were straining households.
While lower cellphone fees may help boost household income and stimulate consumption, they are also exerting downward pressure on prices, rekindling worries about a return to deflation.
The core consumer price index (CPI) for Japan’s capital, which excludes fresh food but includes oil products, fell 0.2% year-on-year in April. That compared with a 0.1% fall in the prior month and a flat reading seen by economists in a Reuters poll.
Market players were closely watching the Tokyo-area CPI, which is available a month before nationwide figures, as a leading price indicator for clues on the impact of cheaper cellphone fees on inflation.
Masaki Kuwahara, senior economist at Nomura Securities, expected new cellphone fees, as well as other discounts on mobile phone charges, to weigh on broader core CPI by around 0.4% point.
In April, communications prices, including cellphone charges, fell 26.5%, knocking 0.44% point off the Tokyo CPI and offsetting slower declines in energy costs, the internal ministry data showed.
Separately, in a full version of its quarterly report issued on Wednesday, the Bank of Japan said low-cost mobile phone plans by major carriers — which became available from mid-March 2021 — would cause an even deeper dip in prices in the summer and the following months as CPI data is rebased.
Reporting by Tetsushi Kajimoto; additional reporting by Kentaro Sugiyama; Editing by Richard Pullin; Reuters