Japan’s consumer-price inflation probably exceeded 2 percent for the first time in a decade as companies passed rising costs onto households, deterring spending and weakening the economy.

Core prices, which exclude fresh food, climbed 2.3 percent in July from a year earlier after rising 1.9 percent in June, according to the median estimate of 37 economists surveyed by Bloomberg ahead of government figures to be released Aug. 29.
Price increases are unlikely to prompt the Bank of Japan to raise interest rates anytime soon because the economy is on the brink of a recession and Governor Masaaki Shirakawa expects inflation will ease. Factory output and household spending fell in July and the jobless rate stayed close to a two-year high, analysts predict separate reports will show on the same day.
“Consumer prices will probably begin to decelerate in the fourth quarter but continue to damp consumption at least until early next year,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. “The next rate increase will be in the third quarter of 2009 at the earliest, and only after the bank confirms a pickup in the economy.”
Only one of the economists predicted July inflation at lower than 2 percent. Core prices haven’t risen 2 percent since January 1998, when they were boosted by a sales tax increase. Excluding the tax, they last gained that much 16 years ago.
(Source: Bloomberg)