Business | Economy
Japan inflation hits 10-year high
Japan's annual consumer inflation accelerated more than expected in May, hitting a new decade-high on surging energy and food prices and adding to the Bank of Japan's headaches over rising costs that are hurting the economy.
- Reuters
- Published: 00:04 June 28, 2008
Tokyo: Japan's annual consumer inflation accelerated more than expected in May, hitting a new decade-high on surging energy and food prices and adding to the Bank of Japan's headaches over rising costs that are hurting the economy.
Industrial production rebounded in May, but not enough to dispel fear that Japan could enter a recession or a period of mini-stagflation. Renewed concerns over the global credit crisis added to the gloom on Friday, pulling Japanese shares down to a two-month low and prompting speculators to roll back their expectations for a Bank of Japan rate hike in coming months.
The core consumer price index (CPI), which excludes volatile fresh food prices but not other food products or oil prices, rose 1.5 per cent from the same month last year, above a consensus market forecast for a 1.4 per cent rise. It was the biggest annual inflation rise since March 1998.
The Japanese economy has been hit by a double whammy of rising energy and raw materials costs and a slowdown in exports to the United States in the wake of the credit crisis.
The BOJ has said that soaring oil and food prices are dampening corporate profits and consumer sentiment and that it is more concerned about downside economic risks than about spiralling inflation.
"The BOJ is concerned that companies, especially small ones, are suffering from rising costs. It can't add to their burden by raising interest rates," said Seiya Nakajima, chief economist at Itochu Corp.
Japanese consumer inflation has have been rising gradually this year, largely due to spikes in prices of food and oil, after hovering below zero per cent for most of 2007.
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