Demand surpassed supply in Japan for the first time in six years, adding to inflationary pressure in the world’s third-biggest economy.
The Bank of Japan’s measure swung to 0.6 percent in the first quarter from negative readings back as far as 2008, an official said today in Tokyo.
The change followed six straight quarters of economic growth that closed a shortfall between demand and supply that had put downward pressure on prices. BOJ Governor Haruhiko Kuroda has said he expects the elimination of this output gap, together with rising inflation expectations, to help drive consumer price gains toward the central bank’s 2 percent target.
“The improvement in the output gap will continue with a moderate recovery in Japan’s economy,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo. “Still, we don’t know yet if that will lead the way to stable inflation, given lackluster growth in wages. Companies are still cautious.”