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Business

Japan consumer prices rise, raising hope for end of deflation

Japan’s inflation rate edged further up in September, raising hopes within the government it is winning its war on decades of falling prices. But economists warn the figures are still too weak to call out a victory.

Japan's core consumer price index, excluding food, rose 0.7 percent in September compared with the same month a year ago, posting its fourth monthly gain in succession, the government in Tokyo announced Friday.

With food prices factored in, the index was up 1.1 percent, the latest inflation data showed.

The news about rising inflation in the world's third-largest economy was welcomed by the government of conservative Prime Minister Shinzo Abe. For the past 15 years, Japan has been locked in a deflationary spiral marked by falling prices, lower consumer spending, reduced investment and dropping growth.

Economics Minister Akira Amari likened Tokyo's battle against deflation to climbing the country's highest mountain, Mount Fuji.

“Oxygen is getting thin but we'd like to hold out,” he told a news conference.

Abe's economic policy, also known as Abenomics, has sought to overcome deflation with a mixture of ultra-loose monetary policy and big government spending. His efforts appear to be bearing fruit as the economy grew at a rate of 3.8 percent in the first half of 2013, and business confidence hit a five-year high in September.

Reading between the lines

However, inflation in September was mainly driven by higher import prices due to a weaker yen, rather than surging domestic demand as is desired. This is because only a few firms were heeding Abe's call to raise wages while also raising prices as the economy rebounds.

Therefore, economists fear that Japan's Prime Minister might not reach his stated goal of reaching an annual inflation rate of 2 percent in the course of next year. London-based economic research group Capital Economics, for example, issued a downbeat assessment, saying any further increases in inflation should be muted.

uhe/ph (AP, dpa, AFP, Reuters)