Japan's consumer prices fall 0.2% in Jan., 23rd straight monthly drop

TOKYO, Feb. 25 Kyodo -
Japan's key consumer price index fell 0.2 percent in January from a year earlier for the 23rd consecutive month of decline, but continued to trim the pace of decline in a sign that the index may log an increase in the months ahead, government data showed Friday.
The impact of the rise in crude oil and food prices did not clearly show up in the figure, an official at the Ministry of Internal Affairs and Communications said, adding that it may take some time until companies pass on the high costs to retail prices.
Some economists said that price hikes on the back of rising international commodity prices could weigh on households and thus may affect the nation's economic recovery, which is showing signs of reviving after a lull.
The pace of decline in the core nationwide CPI, which excludes volatile fresh food prices, contracted for the fourth straight month, with gasoline and heating oil prices rising in January.
The result compares with the average market forecast of a 0.3 percent fall in a Kyodo News survey. The index stood at 99.0 against the base of 100 for 2005, the ministry said in a preliminary report.
By product, gasoline prices rose 8.2 percent and heating oil increased 18.4 percent, while flat-panel television prices dropped 26.1 percent. The government's high school tuition waiver program introduced in April also contributed to the fall in the index.
The economists say that the index may show positive growth in the months ahead, partly because the tuition waiver program would no longer serve as a factor to drag down the index once a year has passed since its introduction.
The recent soaring crude oil prices triggered by the unrest in the Middle East and North Africa would also be likely to gradually push up Japan's energy prices from around spring or later, Keiji Kanda, economist at the Daiwa Institute of Research, said.
''The CPI may log an increase in April, or maybe May,'' but it would stem mainly from ''special factors'' and would not lead the government or the Bank of Japan to acknowledge that Japan has exited from its prolonging deflation, he said.
Yoshiki Shinke, senior economist at Dai-ichi Life Research Institute, said in his report, ''Price hikes stemming from moves in the international commodity markets could serve as a downward pressure on the economy as households' real purchasing power could weaken.''
The core CPI for Tokyo's 23 wards -- a leading indicator of national trends -- lost 0.4 percent in February from a year earlier to 98.2. That compares with the average market projection of a 0.3 percent decline.
While the pace of decline expanded from the previous month, the ministry official assessed that it can be taken as remaining ''roughly flat.''