The Ministry of Internal Affairs and Communications of Japan announced the October consumer price index for Tokyo wards on the 25th, showing that the service industry rose 0.8% from the same month last year, an increase higher than the 0.6% increase in September. Due to rising raw material prices and the depreciation of the yen, dining out increased, and increases in postage and fire insurance premiums also contributed. Cost-push factors are strong, and the trend of rising service prices due to rising wages is weak.

October was a price adjustment period, with postcard prices rising 34.9%, fire and earthquake insurance premiums rising 4%. Letters (standard-sized mail weighing less than 25 grams) rose from 84 yen to 110 yen.

“General services” excluding public services increased by 1.1%. Among them, dining out increased by 3.6%, an increase higher than 3.1% in September. Eating out for sushi increased significantly, up 5.4%. Private rents rose by 0.8%, the highest level since November 1994.

“In the general services sector, prices rose in some sectors such as accommodation and dining out, which were greatly affected by the surge in raw material prices and the depreciation of the yen, while labor costs rose through this,” said Saaisuke Sakai of Mizuho Research & Technology. Regarding service prices, “the development did not progress as much as the BOJ expected.”

Excluding fresh food, overall prices rose 1.8% from the same month last year. Commodities rose 3.1%, far exceeding the 0.8% increase in the service industry. Compared with commodities, which continue to pass on raw material costs to sales prices, the service industry, where labor costs account for a large proportion, has made less progress in passing on raw material costs to sales prices.

The reason is that the daily necessities are increasing, while the consumption including services is weak. Excluding fresh food, the price rose by 3.8%, an increase of 1.0 percentage point from September. The price of rice rose by 62.3%, the largest increase since January 1971. Coffee beans and rice crackers rose by 16.6% and 5.8% respectively.

According to the Empire Database, the number of food categories that saw price increases in October was the highest so far this year. The price of processed foods such as ham and sausages rose significantly, reflecting the increase in packaging materials and logistics costs.