The rising cost of overseas travel and imported goods such as Apple computers is spurring concern in Japan's bond market that Prime Minister Shinzo Abe's success in fueling inflation will be short-lived.
ANA Holding Inc. and Haagen-Dazs Co. increased prices as the yen's inflation-adjusted value against Japan's trading peers dropped to levels going back to 1994, according to an index compiled by Bank for International Settlements. Investors expect the gains in the cost of living to slow to an average of 0.5 percent by around 2016 from 1.3 percent in January, inflation swaps show.
Abe's unprecedented effort to end deflation succeeded in spurring economic growth and boosting consumer prices to a five-year high, partly by encouraging an 8 percent slump in the yen's nominal value in the past year. The rebound in the economy may become unhinged if analysts are right in estimating the yen will fall to 110 this year, according to Koichi Hamada, an adviser to Abe.