Japan prices to keep rising in July, output rebound eyed

Sun Aug 25, 2013 10:19pm EDT
 

By Leika Kihara

TOKYO (Reuters) - Japan's core consumer inflation rate is forecast to have hit its highest in nearly five years in July and factory output is seen rebounding, a Reuters poll shows, suggesting that government and central bank efforts to end deflation are making some progress.

Household spending is expected to have edged up and the jobless rate held steady at its lowest in nearly five years, according to the poll, as growing optimism prompts companies to pay higher summer bonuses and increase hiring.

Friday's slew of data for July could strengthen the case for the government to go ahead with a scheduled two-stage hike in the sales tax from next year, despite some concerns that it may weaken the economic recovery before it is fully entrenched.

Most analysts say the tax increase is needed to rein in Japan's burgeoning public debt, although some concede there is merit to the argument the rise should be more moderate or even delayed.

"Many companies are holding off on capital spending now because they want to see what happens to the economy after the tax hike," said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo.

The government will hold meetings about the tax hikes with executives and academics through this week. Prime Minister Shinzo Abe is expected to make a decision before an APEC summit on October 7, Economics Minister Akira Amari said on Sunday.

BOJ GOAL STILL DISTANT

The nationwide core consumer price index, which excludes volatile fresh food prices but includes fuel costs, is forecast to have risen 0.6 percent in July from a year earlier.   Continued...

 
A passerby walks in front of a retail shop displaying sale advertisement in Tokyo March 27, 2009. REUTERS/Issei Kato