Consumer prices decline 1.2% in Japan
By Tomoko A. Hosaka |
March 27, 2010, Saturday
|
Print Edition
Print Edition
JAPAN'S consumer prices kept falling in February as deflation strengthened its hold on the world's second-biggest economy.
The core Consumer Price Index, which excludes fresh food, dropped 1.2 percent from a year earlier, the government said yesterday, marking the 12th straight monthly decline.
The reading matches Kyodo News agency's average forecast in its survey of economists.
Lower prices may seem like a good thing, but deflation poses a major threat to Japan's fragile recovery. It is a familiar foe, plaguing Japan periodically since its "Lost Decade" in the 1990s.
Driven primarily by exports, Japan's economy grew at an annualized pace of 3.8 percent in the October-December quarter. But companies remain conservative with spending, focusing instead on cutting costs and rebuilding profits. In trying to lure customers as wages shrink, big retailers are slashing prices to new lows.
Chiyoda Co, a nationwide chain of shoe stores, yesterday began selling private label shoes for 990 yen (US$10.65), undercutting rivals. Last week, Fast Retailing Co said it would cut prices on T-shirts and sportwear. Aeon Co is offering suits for 7,800 yen (US$84) in a 10-day campaign until March 30.
Such deals are helping underpin consumer demand for now, said Takuji Aida, senior economist at UBS Securities Japan. But short-term benefits will fade under expectations for prolonged deflation.
The core Consumer Price Index, which excludes fresh food, dropped 1.2 percent from a year earlier, the government said yesterday, marking the 12th straight monthly decline.
The reading matches Kyodo News agency's average forecast in its survey of economists.
Lower prices may seem like a good thing, but deflation poses a major threat to Japan's fragile recovery. It is a familiar foe, plaguing Japan periodically since its "Lost Decade" in the 1990s.
Driven primarily by exports, Japan's economy grew at an annualized pace of 3.8 percent in the October-December quarter. But companies remain conservative with spending, focusing instead on cutting costs and rebuilding profits. In trying to lure customers as wages shrink, big retailers are slashing prices to new lows.
Chiyoda Co, a nationwide chain of shoe stores, yesterday began selling private label shoes for 990 yen (US$10.65), undercutting rivals. Last week, Fast Retailing Co said it would cut prices on T-shirts and sportwear. Aeon Co is offering suits for 7,800 yen (US$84) in a 10-day campaign until March 30.
Such deals are helping underpin consumer demand for now, said Takuji Aida, senior economist at UBS Securities Japan. But short-term benefits will fade under expectations for prolonged deflation.
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