Japan Prices Rise Most Since ’82 on Tax, Utility Fees: Economy

Japan’s consumer prices climbed at the fastest pace in 32 years, boosted by higher utility charges and a sales-tax increase that contributed to the biggest slide in household spending since the March 2011 earthquake.

Consumer prices excluding fresh food rose 3.4 percent in May from a year earlier, the statistics bureau said today in Tokyo, matching the median projection in a Bloomberg News survey of 30 economists. Household expenditure dropped 8 percent on year, more than any forecast, separate data showed.

Price gains will probably slow in coming months before accelerating again toward the Bank of Japan’s 2 percent target - - a goal that strips out the impact of April’s tax rise, Governor Haruhiko Kuroda said this week. Prime Minister Shinzo Abe’s task is to convince companies to dig into record cash stockpiles and raise wages to keep up with inflation.

“The bigger than forecast drop in spending indicates that households are starting to struggle with faster inflation coupled with the sales-tax hike,” said Taro Saito, director of economic research at NLI Research Institute in Tokyo. “It’s hard to imagine households are happy with Abenomics.”

Overall inflation was 3.7 percent, while the gauge excluding perishables and energy was 2.2 percent. Electricity charges rose 11.4 percent on year and gasoline gained 9.6 percent, while fresh seafood prices jumped 14.3 percent.

The yen’s 18 percent decline against the dollar in 2013 raised prices of imported energy and other goods. The currency strengthened 0.3 percent to 101.44 as of 1:51 p.m. in Tokyo.

BOJ Stimulus

The BOJ has estimated the sales-tax increase would add 2 percentage points to the core inflation rate in May. Kuroda said this week the pace will slow to around 1 percent through summer before likely re-accelerating to reach the 2 percent target “in or around” the fiscal year starting in April.

The BOJ won’t add stimulus until next year as the bank has made it clear it expects a slowdown in prices, said Takuji Aida, chief economist at Societe Generale SA in Tokyo.

In an interview this week, Prime Minister Shinzo Abe declared the end of the deflation that wiped out much of Japan’s growth over the past 15 years. “Through bold monetary policy, flexible fiscal policy and the growth strategy we have reached a stage where there is no deflation,” Abe said.

Utility Charges

Wages excluding overtime payments and bonuses fell for a 23rd month in April. Regular gasoline prices were the highest since September 2008 as of June 23, according to the trade ministry.

All 14 major gas and electricity companies raised prices from May to the highest level since the current pricing system began in May 2009, according to the Asahi Newspaper. Tokyo Electric Power Co. announced a price increase of 5.3 percent in May for households, reflecting the higher tax, rising energy costs and other factors.

Fast Retailing Co., the operator of Uniqlo clothing chain, said this month it will raise price of goods by about 5 percent.

“Uncertainties remain for consumer spending as it’s hard to imagine households will stay willing to spend when their real income is clearly dropping,” said Nobuyasu Atago, principal economist at the Japan Center for Economic Research who was previously a BOJ official in charge of price data.

Separate data today showed the nation’s labor market is tightening. The jobless rate fell to 3.5 percent, while the number of job openings per applicant rose to 1.09, the highest ratio since 1992.

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