Japan beats deflation for the first time in two years
- Published
Japan has beaten deflation for the first time in two years, as fuel imports surged following the earthquake and tsunami.
Consumer prices rose by 0.6% in April, from a year earlier, according to the Statistics Bureau.
However, credit ratings agency Fitch has downgraded its outlook on Japan's debt to negative from stable.
Fitch said it was worried about the high levels of Japanese government debt.
"Japan's sovereign credit-worthiness is under negative pressure from rising government indebtedness," said Andrew Colquhoun of Fitch.
"A stronger fiscal consolidation strategy is necessary to buffer the sustainability of the public finances against the adverse structural trend of population ageing."
In January this year, rating agency Standard & Poor's downgraded Japan's credit rating from AA to AA-, also citing Japan's worsening debt situation for the move.
One-off?
The rise in Japan's core consumer price index in April, which excludes food prices, was largely in line with expectations.
Including food, consumer prices rose by 0.3% in April, compared with a year earlier.
Japan has been battling deflation, or falling prices, for more than a decade.
While potentially positive for bargain-hungry shoppers, deflation actually leads to companies and most consumers putting off purchases, in hopes that prices will continue to fall.
The April data is unlikely to reverse that trend, because the gains came largely from higher fuel prices.
The 11 March earthquake and tsunami left more than 24,000 people dead or missing.
It also destroyed some of Japan's ability to generate electricity.
The country has been importing large amounts of fuel in order to make up the difference.
"The commodities and crude oil prices are pushing the inflation figures up," said Credit Suisse chief economist Hiromichi Shirakawa.
"Although I expect consumer spending will recover in May and the months ahead in the wake of the disaster, wages and salaries haven't risen."
He added: "I'm concerned about consumer spending towards the summer".
Japan's economy, the world's third largest, has slid back into recession after the devastation caused by the earthquake and tsunami.
Gross domestic product shrank 0.9% in the first three months of the year.
Japan's economy has now contracted for two quarters in a row, the generally accepted definition of a recession.
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