TOKYO (AFP) — Japan's number two mobile telephone operator KDDI on Thursday announced deep cuts to call charges that analysts said could hinder Asia's largest economy's exit from deflation if rivals follow suit.
KDDI Corp. said it would introduce a new charging system in which call charges will decline by about 20 to 30 percent, while the prices of handsets will increase.
Industry leader NTT DoCoMo Inc. is also considering introducing a similar pricing system following a government recommendation to make billing systems more simple, company spokeswoman Mamiko Tanaka said.
Softbank, which bought Vodafone's British operations last year, unleashed a price war against NTT DoCoMo and KDDI after new rules allowed people to switch operators without having to change their phone numbers.
Analysts said the battle could prevent Japan's consumer price inflation returning to positive territory if the government decides to incorporate the new system into the core consumer price index.
"If the new plan is incorporated, it would have an impact of pushing down the core CPI by up to about 0.4 percentage points," said Noriaki Haseyama, an economist at the Daiichi Life Research Institute.
"If that's the case, it may delay the timing of the CPI picking up," he said, adding that the impact would last for about a year.
Japan's core consumer prices fell by 0.1 percent in August.
Lingering concerns over deflation have created a headache for the central bank, which last July raised interest rates for the first time in almost six years.
The Bank of Japan's policy board last month voted to refrain from hiking its super-low interest rates from 0.5 percent for a seventh straight month.
Some analysts said the falls in mobile call charges could be offset by rises in the prices of other goods.
Daiwa Institute of Research economist Keiji Kanda said there would be an impact if the new call plan is incorporated into the CPI, "but the effect is likely to be offset by rises in energy-linked prices."
RBS Securities chief economist Mamoru Yamazaki, however, estimated that if NTT DoCoMo and Softbank follow suit, the combined move could subtract some 0.6 percentage point from the core CPI, while higher handset prices could only inflate the figure by 0.1 percentage points.
A KDDI spokesman said the changing to charges was not aimed at cutting prices for consumers but at making the billing system more transparent.
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