|Japan inflation surges to 23-year high after tax hike
Japan's consumer prices rose 3.2 percent from a year earlier in April to the highest level since 1991, the government said Friday, largely due to a sales tax increase that is expected to dent growth this quarter.
Other April data for the world's third-largest economy were largely in line with forecasts. Industrial production fell 2.5 percent from a year earlier and household spending sank 4.6 percent. Unemployment was 3.6 percent, the same as in March.
Prime Minister Shinzo Abe's policies aimed at ending a deflationary slump that has slowed growth for nearly two decades have made some headway, though the inflation rate remains well below the 2 percent target set by the central bank and government when the tax hike is factored out.
Japan raised its sales tax to 8 percent in April from 5 percent. Japan's central bank estimates that 1.7 percentage points of the inflation rate in April could be attributed to the tax hike. The 3.2 percent figure is for the core consumer price index, which excludes fresh food.
In its latest assessment of Japan's recovery, the International Monetary Fund said Friday that Japan appeared to be weathering the sales tax increase and exports are expected to begin picking up as demand overseas rebounds. It forecast that inflation would remain modest at 1.1 percent in 2014.
But it cautioned that Japan needs deep, structural reforms to support growth.
"Near-term risks to the outlook are balanced, but the sustainability of the recovery over the medium term is at risk,'' it said.
Consumers and businesses ramped up spending ahead of the tax increase, boosting demand temporarily. The economy is expected to contract or at least slow sharply this quarter. --AP