Japan’s policy makers, striving for more than two years to end deflation, refrained from calling a victory after prices rose in April, with an economic recession damping the nation’s outlook.
Consumer prices excluding fresh food rose an annual 0.6 per cent, the first gain since 2008, the statistics bureau said. Economy Minister Kaoru Yosano indicated today’s data don’t signal sustained gains. Japan’s challenges were highlighted by Fitch Ratings cutting its sovereign-rating outlook, citing the risk of rising debt on post-earthquake reconstruction.
The Bank of Japan is poised to keep its monetary stimulus, contrasting with counterparts from China to India that are tightening policy to stem inflation. Prices climbed in Japan after global energy and food costs rose and retailers suffered product shortages in the aftermath of a record earthquake and tsunami that caused the economy to shrink in the first quarter.
“The BOJ will probably add stimulus if it sees more signs of weakening demand,” said Azusa Kato, an economist at BNP Paribas in Tokyo. “If you strip out energy and food costs, consumer prices are basically flat now.”
The increase in consumer prices in April, the first since 2008, matched the median estimate in a Bloomberg News survey of 25 economists.
Retail sales fell 4.8 per cent from a year earlier in April, the Trade Ministry said in a separate report released today, underscoring the impact on consumers from the March disaster. The drop reinforces forecasts for gross domestic product to shrink for a third straight quarter in the three months to June.
