Friday, March 2, 2007

Reports put Japan economic recovery in question

by Elaine Frei

New data shows that inflation in Japan fell to zero in January when measured by core consumer prices, which excludes the price of energy.  It was the 13th consecutive month of decline for the CPI.  Core inflation was at 0.1 percent in December.  Even when energy prices are included, it is thought that inflation could drop into negative territory within the next couple of months.  While household spending increased by 0.6 percent in January from the same period last year, analysts said that the figure might not be accurate.

The decline in inflation is partly due to declines in the price of consumer electronics devices such as flat-screen televisions and DVD recorders.  In addition, a tight labor market has not put the pressure on wages that many analysts and the Bank of Japan expected that it would.  The governor of Japan’s central bank said after last week’s decision to hike interest rates that inflation could go to zero because commodity prices have fallen, but that the rate hike was justified by a general trend upward.

The news on inflation, or the lack of it, in Japan comes on the heels of separate reports that showed industrial output and retail sales down in January.  Industrial production fell by 1.5 percent from the previous month, while sales were 0.8 percent lower.  While the output figures were lower, the decline was not as much as analysts had feared.

Taken all together, the reports put the health of Japan’s economic recovery in question, according to analysts.

 

 

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