Japanese Consumer Prices Rise In Sign Of Some Success In Abe Economic Policy

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Shinzo Abe
Japan's Prime Minister Shinzo Abe delivers a speech at a dinner during the 19th International Conference on "The Future of Asia" in Tokyo, May 23, 2013.

Japan’s consumer price index on Friday rose in its biggest yearly gain since 2008, in a sign that Prime Minister’s Shinzo Abe’s aggressive monetary policies are helping turn the economy away from deflation.

Japan’s CPI rose by 0.2 percent for June 2013, compared to the same month in 2012. It stayed at the same level as May 2013.

Excluding fresh food, the index rose by 0.4 percent from the year before.

“Japan’s economy is on the right track to pull out of deflation,” Tomo Kinoshita, chief economist for Nomura Holdings Inc., (TYO:8604) told Bloomberg.

The noticeable jump in June’s CPI is partly due to a low CPI level for June 2012 when energy prices declined, said Kinoshita. The increase is also far below Abe’s stated long-term goal of 2 percent annual inflation.

“There’s still a way to go, but I get the feeling that things are moving a little away from deflation and towards inflation,” Japan’s finance minister Taro Aso said.

It’s unclear if wages will keep up with higher consumer prices. For the past two decades, wage growth in Japan has been mostly stagnant.

“We must have wage growth to make inflation sustainable but it could be a slow process as business executives must have forgotten how to increase pay after decades of deflation,” Akiyoshi Takumori, chief economist for Sumitomo Mitsui Asset Management, said.

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