Japan shows first inflation signs as core CPI rises 0.1%

Japan's economy showed its first signs of inflation this year after gasoline prices surged. Core consumer prices, which exclude fresh food, climbed 0.1% in October from a year earlier, the first increase since December 2006, the statistics bureau said today [30 Nov 2007] in Tokyo. The gain probably won't be enough to persuade the Bank of Japan to raise interest rates as the U.S. economic slowdown and financial-market turmoil cloud the outlook for growth. Household spending growth slowed to 0.6% in October from 3.2% in September.

The most Japan's consumer price index has risen in the past nine years is 0.3% in August 2006. The Bank of Japan raised the key overnight lending rate in July 2006 after holding it near zero for more than five years to overcome deflation. Policy makers doubled the rate to 0.5% in February.

Asahi Breweries Ltd., Japan's second-biggest brewer, said today it will increase beer prices to cover the rising cost of brewing malt and aluminum. Meiji Dairies Corp., Japan's biggest maker of milk and ice cream, this week said it will raise prices of 58 products because of rising costs of dairy ingredients.

- Japan's case is interesting because they have been fighting off deflation for years, and now inflation suddenly pops up.

(2007-12-03 11:03:10 SGT) [Biz] Permalink

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