Inflation is picking up in Japan, with growing expectations that the nation is headed for a 3% year-on-year rate in April or soon after. Price rises in Tokyo, a leading indicator of the nationwide trend, have been far exceeding the 3-percentage-point increase in the consumption tax, which was raised to 8% this month.
A woman walks past a show window of a luxury cafe in the Ginza shopping district of Tokyo on April 25. According to a key measure, Tokyo's inflation for April is at a 22-year high. ? Reuters
The climbing cost of daily necessities is particularly conspicuous, according to April data released by Japan's internal affairs ministry.?Many expected sales of day-to-day items would slow after the tax hike, since they can be stockpiled. Yet in Tokyo's 23 wards, prices of toilet paper rolls are up 8.9% on the year — 5.5 percentage points higher than in March.
Tokyo's overall core CPI rose 2.7% on the year in April.
The last time?nationwide core prices, excluding fresh food, jumped 3% on the year was August 1991. Back then, salaries also rose 6.8%.
Many large corporations accepted labor's requests for pay raises during this year's spring wage negotiations. But the basic increases average around 0.4%. Though higher summer bonus payments are expected, overall wage increases may come in below year-on-year inflation of 3%.
Unless consumers are convinced further wage increases lie ahead, household spending could slump as prices climb. This would create a tug of war between sluggish demand and upward price pressure.
