Japan logs first consumer price rise in over a year

Japan\'s consumer prices rose for the first time in over a year, data showed on Friday, but analysts warned that surging energy costs led the increase, not a broad uptick in the cost of retail goods. Pledging to reverse more than a decade of falling prices, Prime Minister Shinzo Abe has unleashed an economy-boosting effort dubbed \"Abenomics\", which he argues will boost growth, conquer deflation and eventually lead to higher pay for workers. In early signs of success, the cost of eating out has been on the rise and price declines for durable goods, such as cars and washing machines, are shrinking, said Masahiko Hashimoto, economist at Daiwa Institute of Research. But he also cautioned that June\'s figures mostly reflected higher consumer electricity bills rather than the sort of wide-ranging inflation that Tokyo is trying to achieve. \"We can\'t necessarily say the increase is due to \'Abenomics\',\" Hashimoto said. \"Good inflation happens when prices rise as the economy grows. We may be seeing this starting to blossom but it\'s still difficult to judge.\" Excluding volatile prices of fresh food, prices rose 0.4 percent in June, the first increase since a 0.2 percent rise in April last year, according to the internal affairs ministry. It was also the biggest single-month gain since late 2008. Japan\'s energy costs surged as it turned to pricey fossil-fuel imports after shutting its nuclear reactors in the wake of the Fukushima crisis two years ago, the worst atomic accident in a generation. A sharply weaker yen, driven down by Tokyo\'s economic policies, has pushed up the cost of those dollar-priced shipments as well as other imported goods while wages have barely budged in years. As part of Abe\'s bid to stoke the economy, his hand-picked governor at the Bank of Japan, Haruhiko Kuroda, unleased a huge monetary easing programme in April and set a two-percent inflation target to be reached in as many years, although many observers are sceptical about his ambitious timeline. Early signs suggest that Abe\'s policies may be having an effect. The country\'s economy expanded at an annualised rate of 4.1 percent in the first quarter and some Japanese firms have recently announced price increases following the yen\'s decline. Others have announced plan to raise employees\' wages. \"The overall improvement could be attributed to the weakening yen as a result of \'Abenomics\',\" Nomura Securities\' chief economist Tomo Kinoshita told Dow Jones Newswires. \"In addition, the economic recovery in the last few months has contributed to the rise in inflation.\" Abe, whose Liberal Democratic Party clinched key parliamentary elections on Sunday, is now weighing whether to usher in a sales tax hike approved by the previous government which would help tackle Japan\'s huge national debt. But it also threatens to sabotage efforts to boost demand among consumers which is key to his plans for the economy. While falling prices may sound like a good thing, deflation is bad for the economy because it encourages consumers to put off spending in the hopes goods will be cheaper in the future, softening demand and hurting producers.