Ja­panese war on de­fla­tion gets a boost

Weekend Argus (Saturday Edition) - - BUSINESS -

TOKYO: The Ja­panese gov­ern­ment’s war on de­fla­tion got a boost last month with a key in­fla­tion in­di­ca­tor ris­ing at its fastest pace in 15 years, new data showed yes­ter­day, as Tokyo bat­tles to re­verse years of fall­ing prices.

Strip­ping out volatile food and en­ergy prices, which have largely driven re­cent in­creases, prices inched up 0.3 per­cent in Oc­to­ber, the coun­try’s best re­sult since Au­gust 1998.

The broader con­sumer price in­dex, which mea­sures a bas­ket of ev­ery­day goods, but ex­cludes the cost of fresh food, rose 0.9 per­cent last month from a year ear­lier, the fastest pace in five years.

Prime Min­is­ter

Shinzo Abe’s gov­ern­ment has put con­quer­ing de­fla­tion and stok­ing growth at the top of its agenda with a pol­icy blitz dubbed “Abe­nomics”.

Sep­a­rate data showed the na­tion’s un­em­ploy­ment rate was un­changed at 4 per­cent last month, while house­hold spend­ing rose 0.9 per­cent.

Get­ting Ja­pan’s no­to­ri­ously thrifty house­holds to spend more is a key part of Abe’s drive, as are yet- to- be- seen wide­spread wage rises.

While fall­ing prices may sound good for shop­pers, it can be bad for growth, be­cause they en­cour­age con­sumers to put off spend­ing.

That makes it dif­fi­cult for com­pa­nies to in­vest and dis- courages them from giv­ing wage rises, which, in turn, re­duces con­sumer spend­ing fur­ther.

Also yes­ter­day, data showed Ja­pan’s fac­tory out­put was up 0.5 per­cent in Oc­to­ber, but the rise was weaker than ex­pected and trailed a 1.3 per­cent ex­pan­sion the pre­vi­ous month. It was also well down from a man­u­fac­tur­ers’ fore­cast of a 4.7 per­cent out­put rise last month.

Still, the econ­omy min­istry painted the fig­ures in a pos­i­tive light.

The up­beat mood was tem­pered by the fact that prices were still largely driven up by higher fuel bills, not surg­ing de­mand for ev­ery­day goods like vac­uum clean­ers and clothes which power the econ­omy as a whole.

Elec­tric­ity bills jumped a hefty 8.2 per­cent, the data showed, as Ja­pan’s bill soars in the wake of the Fukushima atomic dis­as­ter, which forced a nu­clear re­ac­tor shut­down.

Ja­pan has since been im­port­ing fos­sil fu­els to plug the en­ergy gap, a pricey op­tion.

Key to the con­ser­va­tive Ja­panese pre­mier’s growth plans is the Bank of Ja­pan’s huge mone­tary eas­ing drive, and a 2 per­cent in­fla­tion tar­get.

Last week, the Bank of Ja­pan held off fresh pol­icy mea­sures to stim­u­late growth, say­ing that ef­forts to stoke in­fla­tion were tak­ing hold. – Sapa-AFP

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