Japan consumer prices rise for fourth straight month, but due mostly to higher energy prices

Japan's consumer prices rose again in April due largely to higher energy bills.
Japan's consumer prices rose again in April due largely to higher energy bills. PHOTO: BLOOMBERG

TOKYO (AFP) - Japan's consumer prices rose again in April due largely to higher energy bills, data showed Friday (May 26), underpinning a mixed picture for policy makers' efforts to boost growth amid on-and-off deflation.

The country's prospects have been improving on the back of strong exports, with investments linked to the Tokyo 2020 Olympics also giving the economy a shot in the arm. The labour market is tight and business confidence is strong.

But consumer spending remains tepid and the Bank of Japan has struggled to lift inflation despite years of aggressive monetary easing.

After stripping out the volatile cost of fresh food, the inflation rate came in at 0.3 per cent, the fourth consecutive monthly rise after a 0.2 per cent increase in both March and February and a 0.1 per cent rise in January.

Excluding fresh food and energy, however, prices stayed flat, following a 0.1 per cent fall in March and 0.1 per cent rise in February, according to the internal affairs ministry.

But Friday's figures are still way off the Bank of Japan's 2.0 per cent inflation target - seen as crucial to conquering Japan's long struggle to slay deflation, blamed for holding back the once-booming economy.

Inflation "should climb a bit further in coming months," Mr Marcel Thieliant, senior Japan economist at Capital Economics wrote in a commentary.

"But with the boost from higher energy prices set to fizzle out in the second half of the year, inflation will settle at levels well below" the Bank of Japan's target, he added.

The latest data came after separate figures this month showed Japan posted its longest economic expansion in over a decade.

The economy grew 0.5 per cent in the first three months of the year - for a 2.2 per cent annualised rate of expansion.

That was its fifth straight quarterly rise and the longest string of gains since 2006, during the tenure of popular former prime minister Junichiro Koizumi.

A string of short-term leaders, including current prime minister Shinzo Abe, followed Mr Koizumi.

Mr Abe swept back to power in late 2012 on a pledge to reignite Japan's economy with a plan dubbed Abenomics.

The scheme - a mix of huge monetary easing, government spending and reforms to the economy - stoked a stock market rally and fattened corporate profits.

But there had been growing criticism about the plan's muted impact on the wider economy.

Japan has been struggling to defeat years of deflation and slow growth that followed the collapse of an equity and property market bubble in the early nineties.

Falling prices can discourage spending by consumers, who might postpone purchases until prices drop more or look to save money instead.

That puts pressure on businesses, creating a cycle in which firms then cut back on expanding production, hiring new workers or boosting wages.