Core consumer prices in Tokyo, which are considered a leading indicator of Japanese price trends, rose 1.9% in April year-on-year, marking the fastest annual pace in seven years. This was as announced by the Ministry of Internal Affairs on May 6th.

The increase in inflation was driven mostly by rising energy costs and the waning effect of cellphone rate cuts. “Core” consumer prices exclude the price of fresh food. If both fresh food and energy costs are excluded, inflation in April came in at 0.8%.

In this post, we take a look behind the headline numbers and drill down on the main categories that are used to calculate the consumer price index (CPI). The CPI is comprised of ten main components:

1. Food
2. Housing
3. Utilities (Electricity, gas, water)
4. Furniture and House cleaning goods
5. Clothing and footwear
6. Healthcare
7. Transportation and communications
8. Education
9. Culture and entertainment
10. Miscellaneous expenses

Each category is weighted to calculate the overall CPI, with the top three, housing (27.6%), food (25.3%), and transportation and communications (10.1%) making up about 63% of the total.

Here is the breakdown of the inflation numbers by the ten main components:

Let’s drill down a little on the main categories.

Food

Overall food prices in April rose 0.7% versus March and 4.3% versus April 2021.

Fresh food prices rose 15.6% year-on-year, mainly due to the rise in prices of fresh fruit, vegetables, and seafood.

The cost of eating out only rose 1.5% compared to last April and the cost of liquor fell 0.5% year-on-year, the only component of the food category that decreased.

Housing

Tokyo housing prices rose 0.5% year-on-year in April and stayed flat compared to March. This was a relatively small increase compared to the increase in food prices.

In the table below, “imputed rent” is the rental price a homeowner would pay for a housing unit equivalent to the one they own.

However, it’s important to note that average sales prices for both newly constructed and pre-existing homes in the greater Tokyo are at record highs. For more on this, please see: Average sales price of a newly built apartment in Tokyo hits record high in 2021. For more on forecast price trends, please see: Tokyo apartment market forecast 2022

For more on average rent, please see Tokyo average rent and Japan average rent by prefecture

Transportation and Communication

Transportation and Communication was one of the main categories where prices fell year-on-year. The other was clothing.

Falling prices in this category have been caused by across-the-board cuts to mobile phone carrying charges, but this effect will start to have much less of an effect on the category as year-on-year rates fall to match the previous year’s price decreases.

Utilities

Rising energy prices have been been a mainstay of the news since the start of the war in Ukraine and every sub-category in this CPI component rose by double digit percentages, except water and sewage.

Utility prices overall rose 19.5% year-on-year in April but in the CPI calculation utilities are only weighted at 5.6% of the total CPI.

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Source: Tokyo April 2022 CPI, Ministry of Internal Affairs and Communications (PDF in Japanese)

Lead photo: Tokyo, Japan – April 21, 2014: Sushi boxes in supermarket in Tokyo via iStock 469431786 Credit:BLUEXHAND

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