TOKYO (AP) -- Japan’s consumer price index rose 0.4 percent in 2013, the first increase in five years, in further evidence the recovery in the world’s third-largest economy is gaining momentum.
A flood of cash from central bank asset purchases and other government spending has underpinned demand, helping to boost growth despite a weakening in Japan’s trade balance.
A tax hike due to take effect on April 1 is expected to dent growth in coming months, however, as consumers tighten their belts to compensate.
Much of the increase in prices stems from rising costs for imports of food and costly crude oil and natural gas. Excluding those factors, prices rose 0.2 percent in 2013. The core consumer price index, excluding just fresh food, rose 1.3 percent in December.
The data released Friday show factory output rose a seasonally adjusted 1.1 percent in December from the month before. The annual increase was 7.3 percent, the Ministry of Economy, Trade and Industry reported.
The jobless rate fell to 3.7 percent, its lowest level in six years.
After a year in office, Prime Minister Shinzo Abe is facing pressure to deliver on promised economic and administrative reforms to help sustain the recovery. Getting companies to raise wages to help offset the blow to demand from rising prices and taxes will be critical to the success of his strategy for reviving the economy after more than two decades of stagnation.