Japan: Earthquake aftermath pushes up inflation

27th May 2011

Japan's inflation stands at 0.6%, reports The Guardian.

The rise is a result of the March earthquake and tsunami. The website reports that consumer prices rose after fuel imports surged following the nuclear crisis.

Higher energy costs also pushed prices excluding fresh food up 0.6% in April from a year ago, according to the Japanese statistics bureau. Including food, prices rose by 0.3%.

Keith Wade, chief economist at Schroders predicted that prices would rise after the disaster.

The Japanese economy has been in a period of deflation, lasting over 10 years however Kaoru Yosano, Japan's economy minister, said the rise does not mean a sustained end to the situation.

Ratings agency Fitch has revised Japan's outlook to negative from stable.

Bloomberg reports that the Bank of Japan was poised to keep its monetary stimulus, contrasting with counterparts from China to India that are tightening policy to stem inflation.

"The BOJ will probably add stimulus if it sees more signs of weakening demand," said Azusa Kato, an economist at BNP Paribas in Tokyo. "If you strip out energy and food costs, consumer prices are basically flat now."

In a podcast Shogo Maeda, head of Japan equities at Schroders (podcast here) comments on the prospects for the Japanese economy.

He said that by the final quarter of 2011 most Japanese companies will be operating at normal level.

One of the challenges remaining for the Japanese government would be dealing with need to replace its reliance on nuclear energ.

 

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