TOKYO (AP) - A key indicator of Japanese prices rose in October for the first time in more than five years, the government said Friday, but experts warn that the country has yet to fully overcome its headache of deflation that has been stunting the nation's recovery.
The nationwide core consumer price index rose 0.1 percent in October from a year earlier, the Public Management Ministry said.
Since the gain was largely due to unique factors, such as a surge in rice prices following a poor harvest for Japan's staple crop, economists said it does not signal an end to deflation.
The government's top spokesman also warned against complacency.
"It's been a long time,'' said Chief Cabinet Secretary Yasuo Fukuda.
"Still, the rise wasn't large and we can't be too optimistic. I don't think the situation is fine as is.''
Deflation - or continuous price declines - has dogged Japan's economy for the past five years, shrinking corporate profits, pressuring wages, and making debts harder to pay off.
Economists say the persistence of deflation is one of the main reasons Japan has had so much trouble digging itself out of a decade-long slump triggered by the crash of the real estate and stock market bubble of the late 1980s and early 1990s.
The consumer price index fell 0.9 percent in 2002, but declines have narrowed this year amid higher health care charges, soaring rice prices and tax hikes.
The rise in the value of the yen - which makes imports cost more - in the past half-year has also limited price falls.
The tiny 0.1 percent rise - the first since core CPI climbed 0.2 percent in April 1998 - was in line with expectations of financial market players.
Economists surveyed by Dow Jones Newswires and Nikkei News had on average estimated the nationwide core CPI was flat.
Despite a modest cyclical economic recovery driven by exports to the United States and Asia, economists say the index is likely to resume falling.
"The issue is when companies stop restructuring,'' said Junichi Makino, senior economist at Daiwa Institute of Research.
"At least for the next year, companies will continue to trim wages and hold back on hiring, which should keep consumer prices down.''
The Bank of Japan looks to core CPI as its primary reference for prices and says it is keeping its current easy monetary policy in place until the index stabilizes at or above zero. It is unlikely to respond to the latest data, however, given signs deflation hasn't been overcome.
The Tokyo-area consumer price index - considered an early indicator of trends for the rest of Japan - fell 0.2 percent in November, the Public Management Ministry said. - AP
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