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Japan’s Consumer Price Index Down 0.1% in July, for Sixth Straight Month of Decline

September 1, 2007
By Ken Worsley


The headline pretty much says it all: In July, Japan’s core Consumer Price Index fell by 0.1%. July was the sixth consecutive month showing a decline, and the rate matched the fall measured last month.

So, let’s look at what some government officials had to say concerning this news:

Economic and Fiscal Policy Minister Hiroko Ota: “The Japanese economy as a whole remains on a solid recovery path.”

Chief Cabinet Secretary Kaoru Yosano said that the data is “only showing the prices are not rising yet…I don’t believe the economy is still undergoing a continuous decline in prices.”

Not undergoing a continuous decline? I guess six months aren’t enough for Mr Yosano. Government data showed that prices of flat panel televisions dropped 22.3%, laptop prices fell 27.1% and desktop PCs saw a 21.6% decline. Meanwhile, cigarettes stopped contributing as an increasing pressure on consumer prices because 12 months have passed since the tax hike last July.

With a price war amongst Japan’s three largest mobile phone service providers currently underway, July saw a 4.1% fall in mobile phone fees.

That, however, will be dealt with: the Ministry of Internal Affairs and Communications announced on Friday that the new discount cell phone rates will not be counted towards CPI data in the future, as they are “inappropriate.” Instead, the full prices will be used in the government’s monthly index.

Great idea! This might even make Mr Yosano look prescient if the Ministry of Internal Affairs and Communications can push it to the next level. Why not stop measuring flat panel TV prices and cigarettes for now on, if they’re not going to buck up and contribute to the rise in CPI that we so desperately want to manufacture?

Filed Under Consumer Price Index, Economic Reports, Japan 

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Comments

2 Responses to “Japan’s Consumer Price Index Down 0.1% in July, for Sixth Straight Month of Decline”

  1. Durf on September 3rd, 2007 5:16 pm

    Are computers and flatscreen TVs really the sort of things to watch as a bellwether in this regard? I expect prices for these products to fall continuously as the technology in them gets cheaper and manufacturers ramp up production to levels where new economies of scale come into play.

  2. Ken Worsley on September 3rd, 2007 5:35 pm

    Of course, those flatscreen TVs in the index in 2007 used to be cathode tube TVs back when. National CPI is essentially a broad purchasing parity power measure, and generally seeks to form a basket of things generally bought by typical urban consumers. In 2007, this would include flatscreen TVs and computers. In 2010, it may not, and will be adjusted accordingly.

    Japan does use a Laspeyres-type of formula when computing CPI, which revises its index every five years and basie the CPI on the prices of about 600 key items from the monthly “Retail Price Survey” (I think it’s slightly fewer than 600 now, but still over 590). These items are weighted from the results of the monthly “Family Income and Expenditure Survey,” which is supposed to tell the index makers which items are relevant. Apparently it says that flatscreen TVs and computers are…

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