Japan’s core inflation surges to decade high

Japan said Friday core inflation accelerated to the fastest pace in a decade on soaring oil costs while consumer spending tumbled, fanning jitters about the outlook for Asia’s largest economy.

Japan was stuck in a deflationary spiral for years, but the return of inflation has also been met with concern as it is being driven entirely by rising import costs rather than a stronger domestic economy.
Core inflation, which excludes volatile fresh food prices, hit a decade-high of 1.5 percent in May, up from 0.9 percent in April, the government said.

The fear is that higher costs of commodities such as crude oil, steel and grains will cut into company profits and consumer spending.

“The current inflation is a bad thing,” said Kyohei Morita, chief economist for Japan at Barclays Capital. “Not only corporate margins, but also household purchasing power, are worsening,” he said.

Asia Times