Tags: japan | consumer prices | sales tax | utilities

Japan's Consumer Prices Rise Most in 32 Years on Sales Tax, Utilities

Friday, 27 Jun 2014 09:36 AM

Japan’s consumer prices climbed at the fastest pace in 32 years, swelled by a sales-tax increase and higher utility charges that are squeezing household budgets as wage gains remain limited.

Consumer prices excluding fresh food rose 3.4 percent in May from a year earlier, the statistics bureau said in Tokyo, matching the median forecast in a Bloomberg News survey of 30 economists. Household spending dropped 8 percent, more than a forecast fall of 2.3 percent, separate data showed.

Accelerating inflation is a boost for the Bank of Japan as it targets 2 percent price gains — a goal that strips out the impact of April’s 3 percentage point tax rise. At the same time, wages are failing to keep pace with price gains.

“It’s likely CPI gains will slow down from here and stay around 1 percent as the impact of a weak yen and energy prices fade,” Takuji Aida, chief economist at Societe Generale SA in Tokyo, said before the report. “The key is wage growth” as pay rises are needed to support inflation, Aida said.

The yen’s 18 percent decline against the dollar in 2013 raised prices of imported energy and other goods. The currency strengthened 0.1 percent as of 8:41 a.m. in Tokyo.

In an interview this week, Prime Minister Shinzo Abe declared the end of the deflation that wiped out much of Japan’s growth over the past 15 years.

Wages excluding overtime payments and bonuses fell for a 23rd month in April. Regular gasoline prices were the highest since September 2008 as of June 23, according to the trade ministry.

All 14 major gas and electricity companies raised prices from May to the highest level since the current pricing system began in May 2009, according to the Asahi Newspaper. Tokyo Electric Power Co. announced a price increase of 5.3 percent in May for households, reflecting the higher tax, rising energy costs and other factors.

Separate data showed the nation’s labor market is tightening. The jobless rate fell to 3.5 percent, while the number of job openings per applicant rose to 1.09, the highest ratio since 1992.

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Japan's consumer prices climbed at the fastest pace in 32 years, swelled by a sales-tax increase and higher utility charges that are squeezing household budgets as wage gains remain limited. Consumer prices excluding fresh food rose 3.4 percent in May from a year earlier,...
japan, consumer prices, sales tax, utilities
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2014-36-27
Friday, 27 Jun 2014 09:36 AM
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