Japan's Inflation Hits Consumers But Not Kuroda's Price Target

(Bloomberg) -- A surge in fresh food prices pushed Japan’s headline inflation to the highest in almost three years while the central bank’s core gauge that strips out produce stalled again at 0.9 percent.

Frigid January weather brought with it the most expensive fruit and vegetable prices since at least 1970, a blow to households that aren’t seeing significant increases in wages. While the weather will pass, there are few signs that consumers are ready to loosen their purse strings when spring comes around.

"Don’t read too much into the latest surge in Japan’s headline inflation in January," said Bloomberg Economics’ Yuki Masujima. "Mostly, it reflects sharply higher prices of fresh food -- which will put a squeeze on household budgets, potentially undermining spending."

Click here to read a full report on the January CPI figures.

Masujima sees Bank of Japan Governor Haruhiko Kuroda making some headway on reflation, though cautions that Japan is "miles from its 2 percent target." He said the next focus for investors should be the outcome of spring wage negotiations between management and labor unions.

"A favorable outcome for the latter would go some way in supporting consumption, aiding the BOJ’s reflation effort," he said.

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