Consumer prices in Japan increased at the fastest rate since 1982 thanks to an increase in charges for utilities and an increase in sales tax that contributed to the largest slide in consumer spending since the earthquake of March 2011.
Consumer prices not including fresh food increased by 3.4% during May from the same month one year ago, showed the statistics bureau on Friday in Tokyo.
Expenditures in households fell by 8% on the year, which was more than had been forecasted.
Prices increases will slow in the upcoming months prior to accelerating near the 2% target of the Bank of Japan a goal that is an attempt to strip out the impact of the tax rise from April.
Overall inflation was at 3.7% while the gauge that excluded energy and perishables was sitting at 2.2%. Charges for electricity were up 11.4% compared to the same period one year ago. Gasoline prices were up 9.5%, while fresh seafood jumped by over 14%.
The yen’s decline of 18% versus the dollar during 2013 increased prices of energy that was imported as well as other goods.
The Bank of Japan estimated that the increase in sale tax would add as much as 2% to the core rate of inflation during May.
That pace said officials should slow to 1% during the summer prior to likely increasing to its 2% target near the beginning of the new fiscal year in April.
The BOJ will not add new stimulus in 2015, as the bank has been clear it is expecting a price slowdown.
Shinzo Abe the Japanese Prime Minister during an interview declared deflation had ended, which had wiped out a great deal if not nearly all of the growth in the country during the last 15 years.
Wages excluding payments for overtime and bonuses dropped for 23rd straight month during April. Gasoline prices reached their highest since last 2008 during June, said the trade ministry.
All 14 major electricity and gas companies increased prices from May reaching the highest level since the new pricing system started back in May of 2009.