By Chikako
Mogi, Masahiro Hidaka and James Mayger
Jan 31, 2014 3:49 AM GMT+0200
Prices
excluding fresh food increased 1.3 percent from a year earlier, the statistics
bureau said today in Tokyo ,
above a median estimate of 1.2 percent in a Bloomberg survey of 32 economists.
Industrial production rose 1.1 percent from the previous month, while the
number of jobs for every seeker rose to 1.03, exceeding 1 for the first the
time since October 2007.
The
economy’s next tests are spring wage negotiations among major employers and
workers, and an April sales-tax increase that threatens to hurt consumer
spending. Without pay gains that compensate for inflation -- so far driven by
higher energy bills due to a weaker yen and Japan ’s nuclear shutdown -- households
face falling purchasing power.
“Consumers
will be hit in the pocket from rising prices and the upcoming sales-tax hike,”
said Masamichi Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo . “The onus is now
on companies to convert their profits into wage increases and capital
spending.”
Cabbages
Jump
Japanese
stocks rose, with the Topix index trimming its largest monthly decline since
May 2012, as the yen weakened against the dollar. The Topix was up 0.7 percent
at 10:46 a.m. in Tokyo .
The yen was down 0.1 percent at 102.80 per dollar, after touching a five-year
low of 105.44 on Jan. 2.
The Bank of
Japan’s record stimulus that Governor Haruhiko Kuroda began last April helped
weaken the yen about 18 percent against the dollar last year, boosting fuel
prices (JNCPIXFF) and stoking broader inflation toward the central bank’s 2
percent target.
Overall
consumer prices rose 1.6 percent on year, with the cost of fresh food jumping
13.6 percent. Cabbages -- a staple in the country’s diet -- soared 91.7
percent. Electricity was up 8.2 percent.
Incomes
haven’t kept up with inflation, squeezing the spending power of households.
Wages excluding bonuses and overtime fell 0.6 percent in November from a year
earlier, an 18th straight drop.
Abe has met
five times since September with business and union leaders to persuade them to
boost workers’ salaries at the annual wage talks in April. “We want to enter a
virtuous cycle as quickly as possible,” where economic growth propels corporate
profits, employers raise compensation and workers spend more, Abe said in a
December interview.
BOJ Target
Improvement
in corporate profits and tightening in the labor market are boosting
expectations that companies will boost wages, said Yoshiki Shinke, chief
economist at Dai-ichi Life Research Institute in Tokyo .
“The spring
labor negotiations will be crucial to judge whether this positive mechanism
will continue,” said Shinke.
The core
consumer price index has reached the BOJ’s median estimate of 1.3 percent for
the fiscal year starting in April and is more than halfway to its 2 percent
target adopted in January last year. When the BOJ unveiled stronger stimulus in
April, the central bank said it aimed to hit the goal in about two years.
As the
yen’s drop slows and prospects for wage increases remain unclear, policy makers
may struggle later in 2014 to sustain increases in inflation, said Yoshimasa
Maruyama, chief economist at Itochu Economic Research Institute. “It is still
difficult to have a clear outlook for the 2 percent price target,” Maruyama
said.
Sales Tax
Nineteen of
36 economists surveyed by Bloomberg News this month see the BOJ expanding
already unprecedented easing in the first half of this year.
The
month-on-month trend in consumer prices is likely to remain “almost flat” over
the next few months, Goldman Sachs Group Inc. said in a report this week.
Core
inflation is likely to be around 1.25 percent “for some time,” the BOJ said in
statement on Jan. 22, when it kept its policy unchanged. It stuck to its forecast
that core consumer prices will rise 1.9 percent in the year starting April
2015, excluding the effect of sales-tax increases.
Companies
across Japan
have announced price rises ahead of the April increase in the sales tax to 8
percent from 5 percent.
Nippon
Paper Industries Co. said this month it will raise the price of milk cartons as
much as 15 percent from April due to higher prices of imported paper and a weak
yen.
Tokyo Metro
Co. said last month that it will boost base fares by up to 6 percent. Coca-Cola
(Japan ) Co.
said this month that all its drink prices will change to reflect the increase
in the sales tax, which will rise to 8 percent in April from 5 percent.
To contact
the reporters on this story: Chikako Mogi in Tokyo
at cmogi@bloomberg.net; Masahiro Hidaka in Tokyo
at mhidaka@bloomberg.net; James Mayger in Tokyo
at jmayger@bloomberg.net
To contact
the editor responsible for this story: Paul Panckhurst at
ppanckhurst@bloomberg.net
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