— See Separate Table For Details Of Individual Economist Forecasts

TOKYO (MNI) – Japan’s core consumer price index for July is
expected to be unchanged from a year earlier under the new data formula,
improving from a 0.2% y/y fall in June and after posting drops for more
than two years, according to the median forecast of economists polled by
Market News International.

The Ministry of Internal Affairs and Communications will release
the CPI data at 0830 JST on Friday, Aug. 26 (2330 GMT Thursday).

The government has updated the CPI base year to 2010 from 2005 and
reviewed the basket of goods and services used for calculating the main
consumer price measure.

The year-on-year change in Japan’s core CPI was pushed down by 0.7
percentage point on average in the January-June period under the newly
revised CPI formula.

Core CPI, which excludes fresh food but includes energy, in June
fell 0.2% on year under the 2010 base year and product basket, revised
down from +0.4% under the previous formula (which was a third straight
y/y rise).

The core CPI in July is expected to move out of negative territory,
thanks to higher energy costs, economists said.

The average retail price of regular gasoline in Japan rose 9.2% y/y
in early July, accelerating from +6.3% seen in early June, data released
by the Oil Information Center showed.

Looking ahead, Taro Saito, senior economist at NLI Research
Institute, said, “It is possible that core CPI will show year-on-year
gains for the coming several months.”

But he expects the core measure to show drops again toward the end
of the year as the appreciation of the yen trims import costs.

Yoshiki Shinke, senior economist at Dai-Ichi Life Research
Institute, also said CPI will slip back into negative territory in
October, as the on-year effects of increases in tobacco tax and casualty
insurance premiums that took effect in October 2010 will disappear.

The tax hike raised cigarette prices 38.6% on year at the national
level in October 2010, pushing up total CPI by 0.27 percentage point.

With the CPI revision, the Bank of Japan is likely to maintain its
zero interest rate policy at least through the end of fiscal 2012 (March
31, 2013), said Akira Maekawa, senior economist at Global Futures and
Forex.

Central Tokyo core CPI for August, which will be released with July
national price data, is forecast to show a 0.1% drop on year under the
new formula.

The government has not yet released Tokyo CPI for July under the
revised formula. In June the core reading in the capital fell 0.4% on
year.

skodama@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4838 **

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