Japan consumer inflation hits 5-year high, output rebounds
TOKYO (REUTERS) - Japan's core consumer inflation rate accelerated to its highest in nearly five years in July and factory output rebounded smartly, suggesting that government and central bank efforts to end deflation are making some progress.
But the 0.7 per cent annual rise in core consumer prices, which was the second straight month of gains, continued to be driven mostly by increasing energy costs and a weak yen that inflates the cost of fuel and raw material imports.
That may hurt corporate revenues down the road, but for now analysts welcomed the increase as a sign the economy is recovering enough to allow companies to pass on higher costs to consumers.
"The majority of gains in consumer prices still come from energy, and the upward pressure on energy prices is likely to start to slow in coming months," said Mr Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFG Morgan Stanley Securities in Tokyo.