Core prices, which exclude fresh food, climbed 2.4 percent in July from a year earlier after rising 1.9 percent in June, the statistics bureau said today in Tokyo. The median estimate of 38 economists surveyed by Bloomberg News was for 2.3 percent.
Price increases are unlikely to prompt the Bank of Japan to raise interest rates anytime soon because the economy is on the brink of a recession and Governor Masaaki Shirakawa expects inflation will moderate. Household spending fell for a fifth month in July, a separate report showed today.
Households cut purchases 0.5 percent in July from a year earlier, the bureau said. The unemployment rate fell to 4 percent from 4.1 percent. The ratio of jobs available to each applicant fell for a sixth month to 0.89, the lowest since October 2004, a Labor Ministry report showed today.
Industrial production unexpectedly rebounded in July, as Asian demand helped exporters withstand a slump in shipments to the U.S. Factory output rose 0.9 percent from June, when it fell 2.2 percent, the trade ministry said today.
July's increase in core prices was the steepest since October 2007, when they were boosted by a sales tax increase. Excluding the tax, prices last gained that much 16 years ago.
Energy-related products accounted for more than half of the increase in core prices, today's report showed. Food goods added a third. Excluding food and energy, prices rose for only the third time since 1998, climbing 0.2 percent from a year earlier after increasing 0.1 percent in June.
Crude oil fell 18 percent since exceeding $147 a barrel for the first time on July 11. Nippon Oil Corp. this week said it will cut wholesale gasoline prices for the first time since November 2006. Retail gas prices dropped in the past three weeks.
Meanwhile food companies continue to charge more. McDonald's Holdings Co. Japan raised the price of a Big Mac this month. Nichirei Corp., a Tokyo-based food maker, plans to increase prices of some frozen foods next month.
Fuel, food and other daily necessities have risen faster than wages, eroding purchasing power and causing households to become the most pessimistic they've been in at least 26 years. Goods purchased at least 15 times a year climbed 3.6 percent in July, compared with 4.2 percent in June. Wages rose 0.4 percent in June.
The central bank has kept the key overnight lending rate at 0.5 percent since doubling it in February 2007. It shelved a policy of gradual rate increases in April, and last week said the economy was ``sluggish'' for the first time in a decade after a report showed gross domestic product fell an annualized 2.4 percent in the second quarter.
Bank of Japan policy makers have said they consider core prices to be stable between zero and 2 percent and they focus on inflation trends over the long term.