Japanese consumer prices rise

Japanese consumer prices have increased at their fastest rate since 2008, confirming that Abenomics may be finally curing the country of more than twenty years of deflationary stagnation.

For over two decades the Japanese economy has stood still with falling prices. Companies and consumers have held off on spending because everybody expected prices to fall.

Japanese inflation, excluding food, increased by 1.2% in November 2013, compared to November 2012, a much higher rate than economists had expected. In October prices had risen by 0.9%.

The Bank of Japan’s inflation target is 2% by 2015.

Abe’s huge monetary stimulus is paying off

Japan’s Prime Minister, Shinzō Abe, who has been in power since December 2012, implemented a huge monetary stimulus aimed at weakening the yen and boosting domestic demand.

Haruhiko Kuroda, Governor of the Bank of Japan, said:

“The BOJ’s (Bank of Japan’s) monetary policy differs from that of other central banks in that it focuses on changing public expectations. We’re seeing broad improvements in the economy, markets, public sentiment. This is the best opportunity to end deflation.”

Other encouraging economic data from Japan

For the first time in 17 months, salaries in Japan have stopped falling. Industrial production, or factory output, has risen for the third successive month, while retail sales have also grown.

The Nikkei stock average reached 16,178.94 points on Friday, a 6-year high. Analysts say the Nikkei stock average, which has appreciated by approximately 56% so far in 2013, will have its best year since 1972.

Other stock markets around the world have had much more moderate gains in 2013. The Dow Jones Industrial Average rose 25% this year, while Hong Kong’s Hang Seng Index had a very moderate 2.3%. The MSCI World Index rose by 23%.

The yen has also breached the psychological 105 to the dollar for the first time since 2008. Earlier this month the euro reached a 5-year high against the yen.

Confidence in Mr. Abe’s economic policies, known as Abenomics, are being viewed much more positively today not only in Japan but also around the world. During the first 11 months of 2013, foreign flows into the Japanese stock market reached $142 billion (¥14.8 trillion), compared to just ¥830 billion during the same period in 2012.

The Wall Street Journal quotes nader Naeimi, a fund manager at AMP Capital Investors, Sydney, Australia, who said “I believe Japanese shares will have another stellar year – though not without volatility. I’ll be buying into any weakness.”