Friday, September 27, 2013

Japan Continues To See Inflationary Increase

While it seems odd to talk about increased inflation as a good economic development, for Japan it is.  For the last 15 years they have been dealing with a prolonged period of deflation, which has led to at least one lost decade.  About this time last year, Japan's new leader Abe introduced a plan to return Japan to a period of economic growth, which included the Bank of Japan doubling the monetary base in the period of a year.  That policy is now having the desired effect of lowering the value of the yen, leading to increased import prices and hence a rise in prices.

Japan's core consumer inflation in August hit its highest level in nearly five years, while prices of personal electronics rose for the first time since 1992 - signs Japan may be emerging from 15 years of nagging deflation.

Core consumer prices, which include oil products but exclude volatile prices of fresh food, rose 0.8 percent in August from a year earlier after a 0.7 percent increase in July, marking the third straight month of gains.

It was the fastest rise since November 2008, when core consumer inflation hit 1 percent reflecting a spike in global commodity prices, government data showed on Friday.

But most of the increase was caused by rising gasoline costs and a weaker yen that inflated the price of food imports and may dampen consumer sentiment, which is already showing signs of peaking.

That said, prices of durable leisure goods, such as personal computers and audio-visual equipment, rose 0.1 percent in August from a year earlier, turning positive for the first time since 1992, in a sector where consumer prices have fallen steadily.