Japan Inflation Rise at Fastest Pace in Decade

Japan's consumer prices rose at the fastest pace in a decade in March as companies passed on higher costs of gasoline and food to protect profits.
TradingEconomics.com, Bloomberg 4/25/2008 7:00:58 AM

Core prices, which exclude fresh fruit, fish and vegetables, climbed 1.2 percent from a year earlier after gaining 1 percent in February, the statistics bureau said in Tokyo today.

Expectations that the bank will cut the key rate, the lowest among major economies, evaporated in the past month.

Still, economists also predict policy makers will lower their growth forecast from 2.1 percent for the year ending March 2009. Costlier oil and commodities are squeezing companies and households, smothering growth just as a U.S. slowdown cools Japan's export-led expansion.

Core consumer prices resumed rising in October after declining for eight months. They either hovered near zero or fell since March 1998, when an increase in the country's sales tax pushed gains to 1.8 percent.

Food accounted for a third of the increase in core prices last month, and energy contributed more than half. Excluding food and energy, prices rose 0.1 percent, the first increase since August 1998.

Inflation may be contained because stagnant wages have made households reluctant to pay more for goods and services. Wages fell at the fastest pace in three years in 2007.

Core prices climbed 0.3 percent in the year ended March 31, the government said, the quickest rate in a decade. Bank of Japan policy makers consider consumer prices to be stable in a range between zero and 2 percent.

Japan Inflation Rise at Fastest Pace in Decade