Japanese Consumer Price Index (CPI)...

Higher energy and food prices in fuel inflation rates in Japan

The inflation rates in Japan accelerated for the first time in more than two years in April as the energy and food prices increased due to the massive quake that hit Japan in March 11, which caused a damage in the nation's nuclear power. 

Meanwhile, the government noted that the disaster’s effect on the economy has been larger than previously thought, an indication reconstruction plans may exceed the government’s projections, also Japanese government has reduced its economic assessments for the first time in six months after the devastating earthquake that left behind massive destruction and a revolving nuclear crisis. 

Today, the Japanese economy released its consumer price index that inclined 0.3% during the year ended April 30, compared with the previous reading of 0.0% a year earlier, while the actual reading came in line with analysts' expectations. 

Japan's annualized Natl CPI excluding food and energy showed an actual of -0.1% during the 12 months ended April, compared with the previous drop of 0.7% a year earlier, where the actual reading came in line with the market's anticipations. 

Moreover, annual CPI excluding fresh food rose 0.6% in April, from -0.1% last year, whereas the anticipations estimated of 0.6%. 

Crude oil prices jumped 50%, prompting many countries from Thailand to China to raise their interest rates to contain inflation's appreciation, but Japan didn't increase the rates due to the quake's negative results on the economy, while the economy is trying to introduce more stimulus to support the nation to exit from its hurdle phase. 

The signs of a deteriorating economy put renewed pressure on the BOJ to provide additional stimulus after it stepped-up asset purchases and flooded money markets with cash in the wake of the March 11 temblor. The BOJ maintained its view that the economy will rebound later this year as production and supply constraints ease and pledged to take “appropriate” policy action when necessary. 

The Japanese economy has followed expectations when the economy has contracted for a second consecutive quarter after the devastating earthquake and tsunami which contributed to suspend in production process in many Japanese multi-national companies, and prompted consumers to cut their spending. 

Rising costs of daily necessities are spurring concerns that price hikes may further dampen consumption, especially with the temporary shortage of consumer products on the back of the quake that contributed to April’s price hikes. 

Yet, the government last week noted that it aims to allow the Bank to increase legal reserves to maintain financial soundness, while the Bank of Japan reported that it will introduce new appropriate fiscal policies when needed.