Japan’s June Consumer Price Index Down 0.1% - Fifth Straight Month Down

July 27, 2007
By Ken Worsley

Japan’s core CPI has fallen for the fifth straight month, showing a 0.1% decline in June. Amongst the major categories surveyed by the Ministry of General Affairs, only clothing and footwear (0.4%) and medical care (1.0%) showed increases against June 2006.

Japan’s core CPI includes energy prices but not fresh food. According to the ministry, this month’s figure was kept from sliding further by increases in gasoline prices.

Falling prices for cellular phone services and electronic goods have hurt hurt the index. A price war is gearing up in the cell phone industry, with major carriers Softbank and AU both cutting prices in an attempt to take market share away from sector leader NTT DoCoMo. In addition, prices of flat-screen televisions, an item with heavy sales volume, fell by 24.3%. Laptop computer prices were down 29.3% and the prices of desktop PCs fell by 19.7%.

What affect might this have on the Bank of Japan’s August policy board meeting? Although bank officials have not yet commented on the numbers, we believe that they will stick to their position that inflation is due to set in, and that interest rate hikes (or at least one hike) may be justified by future projected increases.

Filed Under Consumer Price Index, Economic Reports