Japan's rising inflation and output a boost for Abenomics

Consumer inflation in Japan accelerated to a five-year high last month and a narrower price measure increased at its fastest pace in 15 years, more evidence that Prime Minister Shinzo Abe's aggressive policies are forging an escape from deflation.

Data released yesterday also included encouraging signs an economic recovery is broadening and will extend into next year, with factory output rising for a second consecutive month and the availability of jobs at the highest in nearly six years.

That bodes well for Abe's goal of reinvigorating the world's third-largest economy and casting off 15 years of deflation through his "Abenomics" stimulus, as rising output and demand for workers should help increase wages and spending.

Indeed, Bank of Japan governor Haruhiko Kuroda reiterated his view yesterday that inflation would reach a target of 2 per cent in coming years - a goal that has been openly challenged by a third of his board.

Economists said the pace of acceleration in inflation may taper off, with spending boosted by consumers buying up before a sales tax increase in April, but the recovery seemed secure.

"We expect core inflation to approach 1 per cent at the end of this year and then to rise more gradually next year," said Hidenobu Tokuda, economist at Mizuho Research Institute. "We are making progress towards ending deflation."