Business Economy 03 Mar 2017 Japan inflation tick ...

Japan inflation ticks up after nearly one-year slide

Published Mar 3, 2017, 11:14 am IST
Updated Mar 3, 2017, 11:18 am IST
A key inflation index, which excludes volatile cost of fresh food, rose 0.1 per cent from a year earlier.
Japan's Prime Minister Shinzo Abe. (Photo: AP).
 Japan's Prime Minister Shinzo Abe. (Photo: AP).

Tokyo: Japanese consumer prices picked up in January for the first time in almost a year, government data showed Friday, halting a long string of declines as Tokyo struggles to put deflation in the rear view mirror.

A key inflation index, which excludes the volatile cost of fresh food, rose 0.1 percent from a year earlier, the internal affairs ministry said.


The increase, largely due to rebound in oil and energy prices, marked the first uptick in 11 months and ended the longest string of price declines in more than five years.

It was also the first positive monthly inflation figure since December 2015.

"Consumer prices will continue to pick up, thanks to oil and a weak yen," said Maiko Noguchi, a senior economist at Daiwa Securities.

"The question is: will underlying strength in inflation pick up with stronger wage growth, household spending and business confidence? I don't think it will at this point," she told Bloomberg News before the data release.


Spending by Japan's households remains weak, separate data showed Friday, with a 1.2 percent on-year fall in January. That was the 11th consecutive month of decline.

Slow wage growth is weighing on consumer spending -- which accounts for more than a half of Japan's GDP -- despite a tight jobs market.

Unemployment has been at its lowest level in around 20 years. Fresh data Friday showed the jobless rate edged down from 3.1 percent in December to 3.0 percent in January.

This week, Japan posted an unexpected drop in factory output for January, the first fall in six months and the latest red flag for the world's number three economy.


Japan has been struggling to reverse a years-long deflationary spiral of falling prices and lacklustre growth.

"The government is teaming up with the Bank of Japan to keep working toward getting out of deflation," top government spokesman Yoshihide Suga told reporters Friday.

Tokyo's years-long effort to kickstart growth -- a blend of massive monetary easing, government spending and red-tape slashing -- stoked a stock market rally, weakened the yen and fattened corporate profits, but growth in the wider economy remains fragile.


The Bank of Japan has blamed external factors, including weak energy prices, for its failure to achieve its promised two percent inflation target, a cornerstone of Prime Minister Shinzo Abe's growth plans, dubbed Abenomics.

Japan's central bank, which holds a policy meeting this month, now expects to hit its price target by March 2019 -- four years later than planned.

Falling prices can discourage spending by consumers, who might postpone purchases until prices drop more or they might save money instead.

That puts pressure on businesses, creating a cycle in which firms then cut back on expanding production, hiring new workers or boosting wages.


The BoJ had hoped that consumers would spend more if prices were rising, persuading firms to expand operations and getting the economy humming. But wage growth has fallen below expectations and workers have less money to spend.