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Prices climb most in 32 years as wages limp along

Bloomberg

Consumer prices climbed in May at their fastest pace in 32 years, swelled by the hike in the consumption tax and higher utility charges that are squeezing Japanese budgets as wage gains remain limited.

Consumer prices excluding fresh food but not energy, rose 3.4 percent from a year earlier, the Statistics Bureau said Friday, matching the median forecast in a Bloomberg survey of 30 economists.

Household spending subsequently sank 8 percent, more than the forecast fall of 2.3 percent, separate data showed.

Accelerating inflation is a boost for the Bank of Japan as it targets 2 percent inflation — a goal that strips out the impact of April’s 3 percentage point tax rise. At the same time, wages are failing to keep pace with price gains.

“It’s likely CPI gains will slow down from here and stay around 1 percent as the impact of a weak yen and energy prices fade,” Takuji Aida, chief economist at Societe Generale SA in Tokyo, said before Friday’s report. “The key is wage growth” as pay rises are needed to support inflation, Aida said.

In an interview this week, Prime Minister Shinzo Abe declared the end of the deflation that wiped out much of Japan’s growth over the past 15 years.

Wages excluding overtime payments and bonuses fell for a 23rd month in April. Regular gasoline prices were the highest since September 2008 as of Monday, according to the trade ministry.

All 14 major gas and electricity companies raised prices from May to the highest level since the current pricing system began in May 2009, according to the Asahi Shimbun. Tokyo Electric Power Co. announced a price hike of 5.3 percent in May for households, reflecting the higher tax, rising energy costs and other factors.

  • http://getironic.blogspot.com/ getironic

    A predictable result.

    Congratulations Abe. You slayed a make-believe dragon.

    Pay attention would-be future politicians, this is how you stay elected: make people feel comfortable. Do you have a politically unpopular problem that no one wants to admit, lest they also admit some difficult cuts need be made? Yes? Answer: Simply appear to address the issue by focusing on something semi-related and unobjectionable.

    For example, if you are the United States, and an entire political ideology is at war with you, don’t identify your enemy. Naming a that enemy would be politically unpopular, and cause some really discomforting introspection stateside about religion qua religion. Instead have a war against something publically palatable — a name that can’t offend anyone until the limp-wristed response associated with it inevitably gives it a bad name, but by that time, the crisis will have been assumed to be “dealt with”, although nothing actually has been done to make things better: A “War on Terror”. Yes, declare war on a tactic. Perhaps next time it will be a “war on flanking”. Very progressive.

    If you’re Japan, and you have really big spending and debt problem to the point where every single citizen would have to pay 8 million yen in taxes this year just to break even, don’t identify this. Naming the problem could prove discomforting among the populace which you have conditioned to be dependent on this system that requires all this stolen and money to run. Instead, decide on a way, not to reduce spending, but rather to get more money by taxing everyone’s savings which have already been taxed at the production level, the employer level, income level and then again as sales tax — and yet you still can’t break even. Well, with this pattern made clear, surely all it will take is one more tax, and all will be fine.

    Yes, an implied “War on Deflation”. If deflation is the enemy, then inflation is the cure! And inflation being seen as a good thing grants license to print money via floating bonds which lowers the value of the money already in supply. i.e., steals the value of the money you have in your bank account. All without public outrage until it’s too late, and the next losers get voted in with their own unique solutions arrived at by same evasive method of making things worse.