Japan's core consumer price index, which excludes volatile fresh food prices, rose 0.6 percent last month from a year earlier, the first increase since December 2008, according to the internal affairs ministry.

The ministry also said Tokyo-area consumer prices, a leading indicator for the national trend, edged up 0.1 percent in May from a year earlier, a slightly slower rise than a 0.2 percent upturn in April.

The nationwide April rise, which was in line with market expectations, was due largely to higher costs for oil products.

Unrest in Libya and the Middle East drove up global oil prices, while Japan's March 11 quake catastrophe damaged oil refineries and disrupted distribution of gasoline, kerosene and other petroleum products.

"It's too early to think that Japan is close to the end of deflation," an official at the ministry said as he briefed reporters on the data.

He noted that the figures were also skewed by factors related to government education benefits. More than a year has passed since the subsidies were introduced, meaning they were no longer distorting year-on-year price changes.

Yuichiro Nagai, an economist at Barclays Capital, said he agreed "we still cannot say that Japan has broken out of deflation," arguing that another factor behind the April price rise was higher utility charges.

Electricity and other utilities charges have risen due to increased gas and oil prices since the Middle Eastern turmoil, he said.

Nagai noted that prices of foodstuffs, excluding fresh food, also rose, as the cost of wheat and other commodities increased and because of supply disruptions due to the March 11 disaster.

Hideyuki Ishiguro, a strategist at Okasan Securities, said "the CPI uptick came mostly from higher materials costs being passed on to consumers, rather than an increase in demand."

Higher prices for end-products may hurt consumer demand, he said.

Japan, with an ageing and shrinking population, has been hobbled for years by deflation, a general drop in prices that saps economic activity, cuts into corporate profits and encourages consumers to defer spending in hopes of a further fall in prices in future.

Japan's government said last week the world's number three economy had plunged back into recession in January-March, because of the impact of the quake-tsunami and the world's worst nuclear crisis since Chernobyl.

Despite the widespread destruction, damage to industrial supply chains and the impact of the nuclear crisis on sectors from farming and fisheries to tourism, most analysts expect the economy to grow again later this year on reconstruction demand in the shattered northeast.

But the April rise in prices, given its causes, is not a good sign for the economy, said Credit Suisse chief economist Hiromichi Shirakawa.

"Commodities and crude oil prices are pushing the inflation figures up," he said. "Although I expect consumer spending will recover in May and the months ahead in the wake of the disaster, wages and salaries haven't risen.

"I'm concerned about consumer spending towards the summer."

The trade and industry ministry said in a separate report Friday that Japan's retail sales in April fell 4.8 percent from a year earlier against a record fall of 8.3 percent in March.

-- Dow Jones Newswires contributed to this article --

del.icio.us	Digg	Reddit
YahooMyWeb	Google	Facebook

Memory Foam Mattress Review

SPACE MEDIA NETWORK PROMOTIONS Solar Energy Solutions Tempur-Pedic Mattress Comparison ... Newsletters :: SpaceDaily :: SpaceWar :: TerraDaily :: Energy Daily XML Feeds :: Space News :: Earth News :: War News :: Solar Energy News