Japanese consumer prices make rare rise
Excluding volatile prices of fresh food, prices rose 0.4 per cent last month, the first increase since April last year.
Prime Minister Shinzo Abe has vowed to pull Japan out of 15 years of falling prices with active government spending, which he argues will boost the economy and lead to higher pay for workers.
The Bank of Japan, meanwhile, unleashed a huge monetary easing program in April and set a 2 per cent inflation target to turn around the economy.
Japan's economy expanded at an annualised rate of 4.1 per cent in the first quarter, and some Japanese firms have announced price increases as the yen weakened since late last year.
Much of the price increase can be attributed to surging energy costs in the wake of the Fukushima disaster.
The country turned to expensive fossil fuel imports after shutting its nuclear reactors. A weaker currency has pushed up the costs of those imports.
Frequently Asked Questions about this Article…
Japan's consumer prices rose in June for the first time in 14 months. Excluding volatile fresh food, prices climbed 0.4% that month (the first increase since April last year). For investors, this signals a potential break in long-running deflationary trends and is worth watching because price moves can affect corporate margins, wages and policy decisions.
Reports often exclude fresh food because those prices are volatile and can mask underlying trends. The article notes that excluding fresh food, consumer prices rose 0.4% in June, giving a clearer view of core inflation pressure that policymakers and investors track.
Prime Minister Shinzo Abe has pledged active government spending to end about 15 years of falling prices. The aim is to boost the economy and lift pay for workers. For investors, sustained fiscal stimulus could support economic growth and corporate revenues, and change expectations for inflation and interest-rate policy.
The Bank of Japan launched a large monetary easing program in April and set a 2% inflation target to help turn around the economy. This policy move is intended to raise inflation expectations; investors watch such easing because it can influence currency moves, bond yields and asset prices.
Japan's economy expanded at an annualised rate of 4.1% in the first quarter. Stronger GDP growth can support corporate profits and justify higher equity valuations, but investors should also monitor inflation, wage trends and policy responses mentioned in the article.
After the Fukushima disaster Japan shut down nuclear reactors and relied more on expensive fossil fuel imports. That shift, together with a weaker yen, pushed up the cost of imported energy and contributed to the recent rise in consumer prices.
The article says the yen weakened since late last year, prompting some Japanese firms to announce price increases. A weaker currency raises the cost of imports—notably energy—so companies may pass higher input costs on to consumers through higher prices.
Investors should watch upcoming consumer price reports (including core measures excluding fresh food), Bank of Japan policy moves tied to its 2% target, government fiscal actions under Abe, wage trends, the yen's direction and energy import costs—these factors, highlighted in the article, will influence inflation and market outcomes.
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