Japan seen shaking off 15 years of deflation

Written by Reuters | Tokyo | Updated: Sep 29 2013, 01:12am hrs
Japans 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% in August from a year earlier after a 0.7% increase in July, marking the third straight month of gains.

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

But most of the increase was caused by rising petrol 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% in August from a year earlier, turning positive for the first time since 1992, in a sector where consumer prices have fallen steadily.

The so-called core-core inflation index, which excludes food and energy prices, fell 0.1% in August. That was the same pace of decline as in July and smaller than a 0.2% fall in June, an indication that downward price pressure is ebbing.

Economics minister Akira Amari said it was too early to declare an end to deflation, stressing that wages and prices excluding energy costs had to rise more. Japan is in the process of emerging from prolonged deflation, Amari said on Friday. An exit from deflation will become distant if were seeing cost-push inflation, where wages arent catching up with rising prices, he said.