"The data reflects the clear effect of rising import prices. The tone is strengthening for Japan to emerge from deflation and that is helping to set conditions for wage increases."
- Hideo Kumano, chief economist at Dai-ichi Life Research Institute
Japanese households are finally facing the prospects of sustained inflationary pressures for the first time in almost a generation, as Shinzo Abe's three-arrow programme is making substantial progress in stamping out deflation in the world's third largest economy. Moreover, other sectors of the economy are also showing signs of stabilization. On the back of positive news the Japanese Yen rebounded from its six-month low versus the U.S. Dollar and hit 102.11.
The Statistics Bureau said that core inflation, which excludes energy and fresh food prices, advanced 0.3% in October on a yearly basis, exceeding a 0.2% gain expected by the analysts. The main contributors to growth were weaker Yen as well as rising electricity costs that have soared 22% since March 2011, when the economy was hit by a earthquake. On a yearly basis, the same measure rocketed 0.9%, posting the fifth consecutive increase. While falling prices sounds good to those experiencing inflation, they are holding back economic growth, as both consumers and companies tend to put off purchases in the hope for a cheaper deal.
At the same time Japanese unemployment rate remained unchanged at 4%, housing starts soared 7.1%, while the industrial production inched higher just 0.5% from a 1.5% gain a month earlier.
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