The Bank of Japan said Wednesday that demand in the country’s economy exceeded potential supply in the three months through March for the first time in nearly six years, in a development that signals prices are rising.
The demand-supply gap, estimated in the central bank’s monthly report, stood at 0.6 percent, improving from minus 0.2 percent in the previous quarter and also suggesting companies will increase capital spending or employ more workers to meet robust demand.
The figure was in positive territory for the first time since the second quarter of 2008, when the gap stood at 0.7 percent.
The result added to the view that the Japanese economy is exiting nearly two decades of deflation, which normally stifles demand with prices falling.
The BOJ has embarked on aggressive monetary easing with the aim of achieving a 2 percent inflation goal in or around fiscal 2015 starting next April.
Excluding the direct effects of the April sales tax hike, consumer prices in Japan grew 1.4 percent in May, expanding for the 12th consecutive month. The result was in line with the BOJ’s projection.
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