Tokyo Inflation Eases as Energy Costs Cool Ahead of Election

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(Bloomberg) — Inflation in Tokyo slowed for the first time in four months as energy price gains eased and the municipal government waived some water charges for households ahead of a national election likely to center on the cost-of-living crunch.

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Consumer prices excluding fresh food rose 3.1% in the capital in June from a year earlier, according to a Ministry of Internal Affairs and Communications release Friday. The median economist forecast was for a 3.3% gain. Overall inflation also came to 3.1%, slowing from 3.4% in May.

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That still keeps price gains well above the Bank of Japan’s price goal of 2%, leaving the central bank on track to mull the timing of its next interest rate hike once uncertainties over global trade have cleared.

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Electricity prices rose 5.3% year on year, slowing from 10.8% in the previous month, while increases in prices for natural gas and fuel oil also slowed. Gasoline prices fell 1%, reversing from 6.3% gains in the previous month. Prices for water fell 34.6% year on year.

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The slowdown in price growth for Tokyo, which serves as a leading indicator for nationwide data, may reassure Prime Minister Shigeru Ishiba ahead of a July 20 upper house election. His Liberal Democratic Party experienced its worst election result on record in a Tokyo metropolitan vote last weekend as public discontent persists over the elevated pace of inflation.

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Price-conscious voters will hit the polls next month after more than three years of inflation at or above the BOJ’s 2% target. Ishiba has pledged cash handouts to ease the burden, while opposition parties have called for a first-ever cut to the sales tax.

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The prime minister last month resumed subsidies to bring down gasoline prices. The soaring price of rice, which more than doubled in May from a year earlier, has drawn national attention and the government responded with measures including the release of emergency stockpiles. On the heels of those steps, the average weekly rice price has dropped for four straight weeks, according to the Ministry of Agriculture.

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—With assistance from Yuko Takeo.

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(Updates with details from the report.)

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