Key inflation rate up 2.4% in Aug., still fastest in over 16 yrs.

TOKYO, Sept. 26 Kyodo - Japan's key consumer price index rose 2.4 percent in August from a year earlier
as inflation remained at its highest level in over 16 years, with energy costs
continuing to rise although there were signs that rises in prices for gasoline,
a key component, are moderating, the government said Friday.
The core nationwide consumer price index, which excludes volatile fresh food
prices, increased for the 11th straight month to 102.6 against the base of 100
for 2005, the Ministry of Internal Affairs and Communications said in a
preliminary report. Energy prices as a whole grew 17.0 percent.
The headline reading matches the average market forecast of a 2.4 percent rise
in a Kyodo News survey.
The gain in core CPI also matched the 2.4 percent rise recorded in July.
Excluding a one-year period during which consumer prices rose in Japan under
the effect of the April 1997 consumption tax hike, the pace of rise was the
fastest since June 1992, when the index expanded 2.5 percent.
In the energy category, electricity prices rose 5.4 percent while natural gas
prices were up 6.0 percent.
Petroleum product prices increased 28.0 percent with propane gas up 10.8
percent, kerosene 54.7 percent and gasoline 26.4 percent. The gasoline price
hike slowed from the 28.7 percent rise the previous month.
The ministry said rises in nonperishable food prices also contributed to the
gain in the August CPI, but that gasoline prices have been moderating over the
last few months, putting a cap on the overall rise in the nation's core
inflation.
Economic and Fiscal Policy Minister Kaoru Yosano said separately that given
recently falling oil and other commodity prices, ''consumer prices are in the
downward trend.''
''But it will take time before consumers come to really feel'' that prices are
falling as there is a ''time lag'' while lower raw material costs spread
through into consumer prices.
Nonperishable food prices rose 4.1 percent. Prices for spaghetti climbed 33.2
percent, cheese 27.0 percent, chocolate 25.0 percent, instant noodles 20.7
percent, bread 20.0 percent and wheat flour 19.1 percent.
A ministry official underlined the rise in the prices of cakes, saying it
resulted from a mixture of factors ranging from wheat price hikes to higher
costs for energy to power ovens.
Prices of some daily goods, such as detergent and tissue paper, were also on a
rise.
Finance Minister Shoichi Nakagawa said at a separate news conference that
producers, sellers and consumers are all facing ''very difficult'' conditions,
stressing the government must hurry to have the recently compiled economic
stimulus package enacted.
Yasunari Ueno, chief economist at Mizuho Securities Co., said the core CPI rise
may have peaked out at the 2.4 percent. He expects the rate to be at 2.3
percent in September and fall further to below 2 percent by the end of this
year.
''Without crude oil price resurging, it would get closer to 0 percent'' in the
next fiscal year starting in April, he said.
With fresh food prices included, the nationwide CPI jumped 2.1 percent to 102.7
for the 11th straight monthly growth.
Excluding both food and energy prices, the index was almost unchanged at 99.4.
The indicator is seen as similar to the core consumer price index used in the
United States, with some experts saying it better reflects price trends.
The core CPI for Tokyo's 23 wards in September grew 1.7 percent from a year
before to 101.8, beating a forecasted 1.5 percent increase.
Consumer prices in Tokyo are seen as the leading indicator of prices across Japan.
Energy costs gained 10.3 percent. Petroleum product prices were up 22.6 percent
with gasoline rising 21.0 percent.