Sat, Dec 29, 2007 page11

• Japan's consumer prices see fastest rise since 1998

  AND MORE TO COME? Although gradually recovering from its slump, economic growth is still struggling amid a shaky global outlook and domestic housing problems

  • AFP
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  Japan yesterday reported its fastest rise in core consumer prices in almost a decade as sky-rocketing energy costs help to lift Asia's largest economy out of years of deflation.

  Meanwhile, the jobless rate fell unexpectedly as household spending and industrial output dropped, according to a raft of data for last month that painted a mixed picture of the health of the Japanese economy.

  Core consumer prices climbed 0.4 percent last month from a year earlier, the largest gain since March 1998, the government said.

  Market forecasts had been for a rise of 0.3 percent after October's 0.1 percent gain, which snapped an eight-month losing streak.

  Higher energy prices were largely behind the pick-up in inflation, which is likely to slow as global oil prices stabilize, said Mamoru Yamazaki, chief economist for RBS Securities in Tokyo.

  "However, even if the contribution of oil products becomes low, I believe that the CPI [consumer price index] will remain in positive territory," he said, predicting a 0.6 percent gain in core consumer prices this month.

  The core CPI for the Tokyo area -- a leading indicator released a month earlier than the nationwide index -- rose 0.3 percent this month year-on-year.

  Despite the return to positive inflation, economists doubt the Bank of Japan will raise interest rates again until midway through next year at the earliest.

  Japan's economy is gradually recovering from a slump stretching back more than a decade, but growth this year has fallen short of expectations amid a shaky global economy and a slump in the domestic housing market.

  Small firms in particular are struggling at the moment against a backdrop of soaring oil prices and higher borrowing costs.

  The unemployment rate fell to 3.8 percent last month from 4.0 percent the previous month. Unemployment declined by 130,000 from a year earlier to 2.46 million last month, the 24th consecutive monthly fall, the government said.

  The unemployment rate is now just above a trough of 3.6 percent seen in July, which was the lowest rate since February 1998.

  Even so there were only 99 jobs available for every 100 job seekers, down from 102 in October and 105 in September, the government said.

  It was the first time in two years that there were fewer available jobs than job seekers.

  Yamakazi said: "Looking at surveys, many corporations are facing labor shortages."

  "However, corporations seem to be cautious about increasing their number of employees aggressively given the worsening business conditions," he said.

  Despite low unemployment, wage growth remains sluggish due to demographic changes and corporate Japan's reluctance to raise salaries amid fierce competition with rivals in China and other emerging markets.

  The government maintained its overall assessment that industrial production "is on a moderately upward trend," predicting that industrial output will rise by 4.0 percent this month from a month earlier, but stay flat next month.
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