Japan’s Price Gauge Rises Most Since 1998: Economy

Photographer: Tomohiro Ohsumi/Bloomberg

A woman shops in a drug store at a shopping mall in Tokyo, Japan. Close

A woman shops in a drug store at a shopping mall in Tokyo, Japan.

Close
Open
Photographer: Tomohiro Ohsumi/Bloomberg

A woman shops in a drug store at a shopping mall in Tokyo, Japan.

(Corrects name of economist in 19th paragraph in story published on Nov. 29)

A gauge of Japan’s prices rose the most in 15 years as higher energy costs fueled broader inflation pressures, in a sign Prime Minister Shinzo Abe is making progress in stamping out deflation.

Prices excluding energy and fresh food rose 0.3 percent in October on year, boosted by a weaker yen and electricity costs that have risen 22 percent since March 2011, when an earthquake led to the shutdown of Japan’s nuclear industry. The gain exceeded a 0.2 percent forecast in a Bloomberg News survey.

Households face the prospect of sustained inflation for the first time in almost a generation, a dynamic that could hurt spending unless wages begin to rise. The focus is turning to salary negotiations early next year that may determine the success of Abe’s bid to reflate the world’s third-largest economy.

“The data reflects the clear effect of rising import prices,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute in Tokyo. “The tone is strengthening for Japan to emerge from deflation and that is helping to set conditions for wage increases.”

The inflation measure turned positive for the first time since October 2008, gaining at the fastest pace since August 1998, when it rose 0.7 percent.

Photographer: Ko Sasaki/Bloomberg

A woman is reflected in the window of a department store in the Ginza area of Tokyo, consumer prices excluding fresh food, the BOJ’s gauge for its 2 percent inflation target, rose 0.9 percent from a year earlier, a fifth straight gain, according to today’s report. Close

A woman is reflected in the window of a department store in the Ginza area of Tokyo,... Read More

Close
Open
Photographer: Ko Sasaki/Bloomberg

A woman is reflected in the window of a department store in the Ginza area of Tokyo, consumer prices excluding fresh food, the BOJ’s gauge for its 2 percent inflation target, rose 0.9 percent from a year earlier, a fifth straight gain, according to today’s report.

The yen was up 0.1 percent against the dollar, trading at 102.21 at 4:48 p.m. in Tokyo. The Nikkei 225 Stock Average fell 0.4 percent today, after advancing yesterday to its highest close since December 2007.

Core Gains

Consumer prices excluding fresh food, the BOJ’s gauge for its 2 percent inflation target, rose 0.9 percent from a year earlier, a fifth straight gain, according to today’s report. The median forecast of economists was for a 0.9 percent climb.

Stripped of the effect of sales-tax increases in April next year and October 2015, the median forecast of BOJ board members is for prices (JCPNEFEY) to rise 1.3 percent in the fiscal year starting April and 1.9 percent the following year.

Economy Minister Akira Amari said today that Abenomics is starting to bring about the end of deflation.

Other data today showed the jobless rate remained at 4 percent in October, and the number of jobs on offer for every 100 people seeking work rose to 98, the highest level since 2007. The jobs-to-applicants ratio indicates Japan’s job market is tightening, a prospect that could put upward pressure on wages.

Industrial production rose less than expected in October, according to separate data today from the trade ministry. The ministry forecasts that output will rise in both November and December.

BOJ Target

BOJ Governor Haruhiko Kuroda said this week he expects Japan to reach the BOJ’s inflation target late in the fiscal year starting in April 2014, or early fiscal 2015. His comments contrast with board member Takahide Kiuchi who said that he sees high uncertainty whether it’s possible to achieve the inflation target within the central bank’s time horizon of about two years.

Thirty-five of 37 analysts surveyed by Bloomberg News this month said the BOJ won’t achieve its 2-percent-in-two-years goal, with 22 seeing Kuroda’s board altering its objective.

Today’s report showed that electricity prices increased 8.2 percent from a year earlier, having risen every month since April 2011, the month after the disaster.

Gasoline prices rose to 161.4 yen ($1.58) per liter on Sept. 9, the highest level since 2008, according to the trade ministry. They stood at 156.9 yen this week.

Otokoyama Co., a sake maker based in Hokkaido, will raise prices of its beverages for the first time in 20 years from February, citing increased raw material and energy costs.

Rice Bowls

Matsuya Foods Co. will increase the price of its standard bowls of rice topped with beef by 10 yen to 300 yen to coincide with the tax rise in April, the Nikkei newspaper reported.

Today’s report showed that service prices increased 0.4 percent from a year earlier after gaining 0.1 percent in September, while goods prices rose 1.9 percent after a 2.1 percent climb the previous month.

The fall in goods inflation shows the impact of the weak yen is fading, while the faster service inflation is a sign that domestic price pressures are picking up, Marcel Thieliant, Japan economist at Capital Economics in Singapore, wrote in an e-mailed note following the release.

Yasunari Ueno, chief market economist at Mizuho Securities Co., wrote in a report this week that service prices and wages are the keys to sustained consumer price growth.

Falling Wages

Salaries are falling behind price gains even as Abe pushes companies to pay their workers more, undercutting consumers’ spending power. Regular wages excluding overtime and bonuses declined 0.6 percent in September from a year earlier, a 16th straight drop.

The Japanese Trade Union Confederation, or Rengo, plans to demand pay increases of more than 1 percent in the labor talks, according to a statement released last month. Toyota Motor Corp. (7203) President Akio Toyoda said last month that workers at his company need better benefits and wages.

Elsewhere in Asia, South Korea’s industrial production increased at the fastest pace in 11 months in October. India’s economy probably expanded at a faster pace in the third quarter compared to the previous three-month period, according to a Bloomberg News survey of economists.

In the euro area, the jobless rate probably held steady in October, while consumer prices increased in November at a faster rate.

To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.