Bloomberg News

Japan Price Gauge Stops Slide as Abe Drives Pickup: Economy

October 25, 2013

Women Browse Clothing Outside A Store

Women browse clothing outside a Takatomi store in the Ginza area of Tokyo. Higher energy costs and a yen down about 11 percent against the dollar this year are driving the price gains, rather than the stronger domestic demand that Abe needs for a sustained rebound. Photographer: Ko Sasaki/Bloomberg

A gauge of Japan’s prices (JCPNEFEY) ended four years of declines, signaling progress in Prime Minister Shinzo Abe’s campaign to stamp out deflation and drive a sustained economic revival.

Prices excluding energy and fresh food were unchanged from a year earlier, after sliding every month since December 2008, the statistics bureau said today in Tokyo. That matched the median forecast of 19 economists in a Bloomberg News survey.

Advances in countering falling prices may help Abe sustain confidence in the nation’s recovery and encourage companies to raise wages as a sales-tax increase planned for April threatens to deal a blow to consumption. Fiscal and monetary stimulus are underpinning a revival in the world’s third-biggest economy after 15 years of deflation.

“Today’s data show that an entrenched deflationary trend is coming closer to ending,” Akiyoshi Takumori, chief economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “Wage growth will be key to cushioning the price increases.”

The yen rose 0.2 percent against the dollar as of 3:50 p.m., and the Topix index slipped 2.1 percent. Canon Inc. (7751), the world’s biggest camera maker, cut its profit forecast yesterday.

The end of the slide in prices excluding energy and fresh food is “a mark we have to pass on the way to ending deflation,” Japanese Economy Minister Akira Amari told reporters in Tokyo today after the report.

Core Gains

Consumer prices excluding fresh food rose 0.7 percent from a year earlier, a fourth straight gain and matching the median estimate of economists. The Bank of Japan focuses on this gauge as its key measure, with board members seeing a 0.6 percent gain this fiscal year, and 1.9 percent in the year starting April 2015, according to their median forecast in July. They will update their outlooks at a meeting next week.

Abe and the central bank are targeting 2 percent inflation.

Regular wages excluding overtime and bonuses declined 0.6 percent in August from a year earlier, a 15th straight drop. Abe said in parliament yesterday he would continue asking companies to raise salaries.

Gasoline prices rose to 161.4 yen ($1.66) per liter last month, the highest level since 2008, according to the trade ministry. They stood at 160.1 yen this week. Demand for liquid natural gas may rise as the nation enters colder months without any nuclear plants in operation, pushing up electricity costs, according to the meteorological agency.

Bonito Fish

Processed-food maker Ajinomoto Co. says it will raise prices of some items by 6 percent to 7 percent from January because of the rising cost of bonito fish and the weaker yen.

Elsewhere today in the Asia-Pacific region, South Korea said the economy expanded a more-than-forecast 1.1 percent in the third quarter from the previous period. The Philippines said imports rose 6.9 percent in August from a year earlier, a slower pace than in July.

In Europe, a German index of business confidence, the Ifo institute’s business climate index, probably rose for a sixth month in October, according to the median estimate of economists surveyed by Bloomberg News. The U.S. will see reports on durable-goods orders for September and October consumer confidence.

To contact the reporters on this story: James Mayger in Tokyo at jmayger@bloomberg.net; Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

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


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