Japanese consumer prices rose last month for the first time in more than two years, the government said yesterday, offering the latest sign the country is emerging from years of falling prices that have prolonged its economic slump.
The turnaround is good news for the world's second-largest economy, but boosts the possibility the central bank will begin tightening its ultra-loose monetary policy or raise interest rates some time next year.
The nationwide core consumer price index, which excludes volatile fresh food prices, edged up 0.1 percent last month from a year earlier. It was the first increase since October 2003 and followed a flattening of prices in October.
For most of the last four years, Japan has been stuck in a state of deflation, when prices spiral downward, eroding paychecks and corporate profits and generally hindering economic growth.
The Bank of Japan has kept its low interest-rate policy for four years to help spur a recovery after nearly 15 years of slow or no growth.
But the central bank has pledged to start tightening money supply and raise interest rates when deflation finally stops, and there are increasing signs that prices are starting to turn around -- beginning with core prices leveling in October.
Some politicians, including Prime Minister Junichiro Koizumi, however, have urged the Bank of Japan not to move too quickly for fear that this would hurt Japan's recovery.
Chief Cabinet Secretary Shinzo Abe noted yesterday the overall price index, including food and energy prices, actually dropped by 0.2 percent in November.
"The government has not changed its understanding that Japan is in deflation," Abe said. "The government and the Bank of Japan are working toward the same goal, getting out of deflation. We leave the measures up to the Bank of Japan, but it is necessary to coordinate with each other on policy."
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