Japan Price Gauge Rises Most Since '98 in Boost to Abenomics
A gauge of Japan's prices (JCPNEFEY) rose the most in 15 years 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 from a year earlier, the statistics bureau said today in Tokyo. The median estimate of 19 economists surveyed by Bloomberg News was for a 0.2 percent increase.
The Bank of Japan's record easing has helped weaken the yen 15 percent against the dollar this year, pushing up prices of imported goods and energy and forcing some retailers to pass on higher costs to consumers. As Abe bids to reflate the world's third-largest economy, he needs to convince companies to raise wages to sustain growth and help consumers weather a sales-tax increase in April.
'The tone is strengthening for Japan to emerge from deflation and that is helping to set conditions for wage increases,' said Hideo Kumano, chief economist at Dai-ichi Life Research Institute in 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 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 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.
'Very Ambitious'
The yen was little changed against the dollar, trading at 102.28 at 9:36 a.m. in Tokyo. The Nikkei 225 Stock Average was down down 0.5 percent, after advancing yesterday to its highest close since December 2007.
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 board member Takahide Kiuchi said this week 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. At a separate event, BOJ Governor Haruhiko Kuroda said the target was 'very ambitious.'
The yen's slide has boosted the cost of energy imports, which have increased because of the atomic industry's shutdown in the wake of the March 2011 earthquake and nuclear 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.
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.
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.
Wage negotiations early next year may prove crucial for Abe's reflationary drive.
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.
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
Enlarge image 
Post a Comment for "Japan Price Gauge Rises Most Since '98 in Boost to Abenomics"