Energy costs fuel surge in Japanese consumer prices

Japan's consumer prices last month rose at the fastest pace since 2008 as energy costs rise and Prime Minister Shinzo Abe makes progress in pulling the economy out of 15 years of deflation.

Consumer prices excluding fresh food climbed 0.7 per cent from July last year, the statistics bureau said yesterday. That exceeded the median estimate of 0.06 per cent in an analyst survey. Industrial output increased a less-than-forecast 3.2 per cent from June.

"Japan is moving into real inflation," said Junko Nishioka, the chief economist at Royal Bank of Scotland and a former Bank of Japan official. "The data is encouraging for the BOJ, and they are likely to keep monetary policy on hold."

Higher energy costs following the shutdown of the country's nuclear reactors drove prices higher as the central bank rolls out an unprecedented easing that helped spur a third consecutive quarter of growth. The bank's pledge in April to double the monetary base over two years has weakened the yen, which has tumbled 20 per cent against the US dollar over the past year, making imported oil and wheat more expensive.

Stripping out energy and fresh food prices, deflationary pressures showed signs of easing. By that measure, prices fell 0.1 per cent last month, slowing from a 0.2 per cent decline in June, the data showed. It was the smallest drop since February 2009, and less than a median forecast for a 0.2 per cent fall in a survey.

The jobless rate was 3.8 per cent, a separate government report showed yesterday.