2014.06.2622:50:51UTC+00Rise in consumer prices boosts Japan inflation

Good news for the Bank of Japan (BoJ) was the opposite for Japanese households as prices of consumer products increased without the support of higher wages. 

Latest figures show that Japan’s consumer prices climbed 3.4%, excluding fresh food, in May led by the effects of the sales tax hike that took effect in the beginning of April and utility providers charging more for services. The increase in prices was the largest jump the east Asian country has had in 32 years, making it a positive sign for central bank officials who are targeting a 2% inflation rate by next year. Prime Minister Shinzo Abe stated earlier this week that the growth reducing deflation Japan has faced for the last 15 years was at an end.

In the meantime, such gains are proving to be a strain for individuals as household spending decreased by 8%, going beyond the market prediction of 2.3% despite the labor market’s performance. Unemployment rate in the country went down to 3.5% with the highest number of job openings per job applicant in more than two decades at 1.09. However,  numbers also showed that wages achieved its 23rd month of decreasing with no concrete hikes in the near future.

Adding to the burden are the simultaneous higher charges put into effect by major utility companies, including the Tokyo Electric Power Co., in May. According to the Asahi Newspaper, gas and electricity rates have been put to their highest since 2009.

Economists forecast that additional gains to the CPI will have a slower pace due to the weakening of the yen. The Japanese currency has depreciated 18% so far this year against the US dollar.