Price rises put Japan halfway towards inflation goal

PUBLISHED : Saturday, 28 December, 2013, 12:03am
UPDATED : Saturday, 28 December, 2013, 12:03am

Japan has passed the halfway mark towards its inflation goal as new data showed prices rose last month by the most in five years, while regular wages halted 17 months of declines, underlining progress under Abenomics on key fronts to revive the economy.

Factory output rose for a third consecutive month, retail sales jumped and job availability hit a six-year high, other data showed yesterday, adding to growing signs that the recovery is gathering momentum.

Prime Minister Shinzo Abe, who took office a year ago, is leading a push to conquer years of growth-sapping deflation.

The data showed progress towards the central bank's target of 2 per cent inflation by about 2015. But achieving that goal could prove challenging if the yen strengthens.

"Consumer prices show signs of being pushed up by the weak yen, so we're still looking at cost-push inflation," said Yasuo Yamamoto, senior economist at Mizuho Research Institute.

The core consumer price index, which includes oil products but excludes volatile costs of fresh food, rose 1.2 per cent in November from a year earlier. It was the fastest pace of growth since a 1.9 per cent gain in October 2008, when a spike in global commodity prices pushed up import costs.

And in a sign of broadening inflation, the so-called core-core inflation index - which excludes food and energy prices - rose 0.6 per cent in the year to November. That marked the second consecutive month of gains and the biggest increase since August 1998.

Factory output rose 0.1 per cent last month, less than a median market forecast for a 0.4 per cent increase, although manufacturers surveyed by the government expect production to rise this month and the next. The Bank of Japan launched a burst of monetary stimulus in April, pledging to accelerate inflation to 2 per cent in roughly two years via aggressive asset purchases.

In the pay data, wage earners' total cash earnings rose 0.5 per cent year on year last month, up for the first time in five months. Regular pay, which excludes overtime and bonuses, was flat - the first time it has stopped falling in 18 months - amid signs of a tightening job market.

Retail sales climbed 4 per cent last month from a year earlier, partly due to demand before sales tax increases next year.