“Japan’s core consumer prices rose in April from a year earlier for the first time in more than two years as the impact of school tuition fees faded and commodity costs crept up, but underlying prices remained weak as the March earthquake hurt consumption…

…A government policy to subsidize school tuition fees is no longer distorting annual changes in prices, as more than a year has passed since the policy was introduced. The move was estimated to have pushed down overall prices by about 0.5 percent.”

OK. So this lift is not likely to last given the special adjustment, but it is a nice break from the regular drone of deflationary news. As I have stated before, I tend not to pay much attention to official government statistics on inflation, but this headline alone made me pause. The rest of the article summarizes the prospects for Japan’s post-disaster recovery economy.

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“…The so-called “core-core” consumer price index, which strips out the effect of volatile food and energy costs, fell 1.2 percent last month from a year earlier after a 1.0 percent drop in November, data showed. It was the biggest since drop since the series began in 1970…”

Of course, there is now renewed speculation on yet another stimulus package, currency intervention, and other monetary action. With the national debt almost double GDP, Japan’s options are more limited than ever.

Standard and Poor lowered Japan’s credit rating outlook earlier this week. An actual rating cut may drive interest rates up and further constrain the government’s options. Daniel Fisher describes Japan’s dire debt and economic outlook in Forbes: “The Global Debt Bomb.”

Reuters provides a graphic comparing inflation rates amongst Japan, the Eurozone, and the U.S. Click here.

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