TOKYO, Dec 27: Japan’s key price data on Friday showed signs of easing deflation this year, but this was prompted mainly by rising medical costs in unwelcome news for struggling households.

The central Tokyo area consumer prices, a leading indicator for national prices, fell 0.4 per cent on average by mid-2003 from last year in both all-inclusive and core readings, marking five years of declines.

But deflation, or constant price drops, eased from a 1.0-per cent drop in 2002 for all-inclusive Tokyo data and a 0.9-per cent fall in the core index, which excludes volatile fresh food prices, the government said.

The mid-December Tokyo prices also showed slight 0.1 per cent gains month on month in both overall and core data, although prices in the heart of consumer spending still dropped from year-earlier levels.

In recent years Japanese consumers have benefited from price drops in general and the emergence of dollar stores, but stubborn deflation has also squeezed corporate profits, triggering broad-based salary cuts and layoffs.

The Tokyo index for medical services rose 3.5 per cent in all-inclusive data after the government raised the employee contribution under the national healthcare plan to 30 per cent of the cost of clinical visits, effective April, from 20pc previously.

The only other index that rose was for “miscellaneous”, which gained 1.0 per cent from last year and was featured by higher price tags for imported brand-name handbags.

Price drops narrowed in hydro bills in central Tokyo this year after utility charge cuts by Tokyo Electric had run its course in April 2002. Drops in private-sector apartment rents also showed signs of easing, government data showed.

However, overall prices were marked down sharply, particularly in the “educational entertainment” category: electronic goods, such as personal computers, refrigerators and washing machines, and entertainment costs for renting cars, playing golf and watching baseball games.

Meanwhile, the all-inclusive nationwide consumer prices fell 0.5 per cent in November from a year earlier but rose 0.5 per cent from October. Core national consumer prices in November fell 0.1 per cent from a year earlier and dropped 0.2 per cent from the previous month.

The national prices have been tracing the Tokyo pries, so they should show a similar picture next month except for rents, when the 2003 nationwide figures are released, said an official at the Ministry of Public Management, Home Affairs, Posts and Telecommunications. —AFP