The government on July 26 announced that the June consumer price index, not including perishable food, rose 0.4 percent from the same month a year before, representing the first increase since April 2012. The government must be aware that price rises are not based on expansion of demand. If food and energy items are excluded, the consumer price index in fact declined 0.2 percent.
The rise in the consumer index as announced by the government is mainly attributable to increases in heating and lighting expenses due to the higher costs of imported energy resources — an effect of the cheap yen brought about by the Bank of Japan's unprecedented monetary easing. Prices for food items also have been rising recently.
The government and the BOJ hope that price rises will dissuade businesses from price-cut competition and, instead, move them to increase wages. The result would be economic recovery from expanded consumer spending. But the government announcement only reinforces the fear that the burden on households will increase with little prospect of wage increases for workers.