Japan’s consumer prices halted a six-month slide in May as a weakening yen contributed to rising energy prices, helping Bank of Japan Haruhiko Kuroda’s campaign to stoke inflation expectations.
Consumer prices excluding fresh food were unchanged in May from a year earlier, matching the median estimate in a Bloomberg News survey of 29 economists, a report released by the statistics bureau in Tokyo showed Friday. The yen is down 19 percent against the dollar from a year ago as Kuroda pumps liquidity to end 15 years of entrenched deflation.
Kuroda is counting on expectations for rising prices to spur spending and demand for credit in the world’s third-largest economy. Friday’s data may boost confidence in the reflationary policies of Prime Minister Shinzo Abe ahead of next month’s upper house election, while reducing pressure on the BOJ for additional monetary stimulus.
“Kuroda must be relieved and this is going to be a great selling point for Abe as he fights upper house elections next month,” Kohei Okazaki, an economist at Nomura Securities Co. in Tokyo, said before Friday’s release. “Prices are likely to gain gradually.”
A survey published by the Nikkei newspaper this week found 55 percent of respondents approved of Abe’s economic policies, and 66 percent supported the cabinet. The paper surveyed 918 people by phone between June 21-23 and did not give a margin of error.
Some food retailers are offering more expensive items to lure customers. McDonald’s Holdings Co. Japan this week started selling its most expensive hamburger ever, a special summer item priced at 570 yen ($5.79).
Meantime, some companies are already expressing concern about rising prices. The Japan Iron and Steel Federation, with nine other industrial organizations, submitted a request to Toshimitsu Motegi, minister of trade and industry, for tax breaks and financial assistance to cushion the impact of higher utility bills pushed up by nuclear-plant shutdowns and a weaker currency.
Sentiment among Japan’s largest manufacturers may turn positive for the first time since September 2011 in Tankan survey due on July 1, according to the median forecast of 22 economists surveyed by Bloomberg News.
“We don’t know yet if this will be a trend for inflation. It’s too early to say Japan is seeing light at the tunnel for beating deflation,” Nomura’s Okazaki said. “The key is wage growth.”
The fading effect of a large increase in TV prices last year may have contributed to today’s figures, which also reflect a decline in energy prices last May, according to Okazaki.
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