World Economy

Is Japan's inflation actually on the way up?

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Japan could already be exiting decades of growth-sapping deflation faster than thought thanks to food manufacturers launching a raft of new products, according to a new retail price index.

In spite of embarking on a massive two-year program of quantitative easing, Japan has yet to emerge from two decades of deflation, according to official government indices. Excluding the effects of last April's sales tax hike, the nationwide consumer price index was edging above zero in February and had stopped rising for the first time since May 2013.

That may be because, according to Hitotsubashi University professor Naohito Abe, government number-crunchers have overlooked "shrinkfaltion": Companies sneaking price increases past consumers by launching new products but putting less in the package.

"[We wanted to] utilize information on new products that are often priced higher," Abe told CNBC by email.

Paying more everyday

Since last April, consumers have been paying over one percent more at the supermarket cash register for packaged products, according to the SRI Hitotsubashi retail price index, developed by Abe's team at Hitosubashi University, Intage Inc and the New Supermarket Association of Japan.

During the same period, the core inflation rate, which does not include fresh food and energy, has been bobbing in and out of negative territory, and came in at 0.10 percent in February. The data for March will be released on Friday.

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The POS-CEI index is a weighted average of the prices that consumers are paying for a product at 4,000 stores, adjusted for volume -- and prices, net of tax, tended to be higher after last April's tax hike, according to Hitotsubashi's Abe.

Cutting elsewhere

Still, the new index is not expected to replace the official CPI data.

"The [new] index indeed captures only a third of the [official] CPI: goods account for 49 percent, but the index doesn't include fresh food and aquatic products (6 percent), nor electricity gas & water charges (5 percent), nor petroleum (4 percent)," Capital Economics' Japan economist Marcel Thieliant told CNBC by email.

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However, analysts say the index's findings could provide some clues as to why Japanese consumers have doggedly refused to start spending: They're already well aware that they are paying more at the tills.

Household spending in February fell by 2.9 percent from the previous year, marking the 11th consecutive month of decline as consumers avoided big-ticket purchases such as furniture or vacations.

"Consumers may be choosing to spend less on items that they don't see as necessities", Mizuho chief market economist Yasunari Ueno told CNBC by phone.