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Japan core CPI falls at record pace for fourth month in August

October 1, 2009
By Ken Worsley


On Tuesday, the Ministry of Internal Affairs and Communications announced that Japan’s consumer price index had fallen 2.2% in August, while core consumer prices (excluding fresh food) tumbled a record 2.4%. Core CPI has now fallen at a record pace for four consecutive months.

As Japan includes energy prices as part of its core CPI, it’s always helpful to look at what the CPI looks like with energy stripped out. Here is a breakdown of CPI categories for August:

  • August general nationwide consumer price index: -2.2%
  • August general nationwide consumer price index (excluding rent): -2.6%
  • August nationwide core CPI (excluding fresh food): -2.4%
  • August nationwide consumer price index (excluding fresh food and energy): -0.9%

Let’s take a look at how the major individual categories fared in August:

  • Education +0.9%
  • Medical care +0.0%
  • Food -0.1%
  • Housing -0.2%
  • Clothes and footwear -0.6%
  • Miscellaneous -0.7%
  • Reading and recreation -3.0%
  • Furniture and household utensils -3.1%
  • Transportation and communication -7.6%
  • Fuel, light and water charges -9.1%

Only one category showed a rise in August, with one flat. The strongest downward pressure on core CPI was energy costs, which is why we only see a 0.9% fall when “core” core CPI is looked at.

Still, the specter of deflation looms, as prices for consumer goods were down 4.1% in August. In an article published Tuesday, the Nikkei illustrated some of the forces behind the continued fall in consumer prices:

The Cabinet Office estimates that the supply-demand gap is currently minus 7.8%, meaning actual annual demand falls short of potential supply by 40 trillion yen. To encourage shoppers to open their wallets wider, companies are cutting prices across a range of products, from daily necessities to clothes to home appliances.

In other words, it makes sense for consumers to wait for prices to fall even further.

Filed Under Consumer Price Index, Economic Reports 

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Comments

One Response to “Japan core CPI falls at record pace for fourth month in August”

  1. KB Hobby on February 4th, 2010 9:22 am

    Deflation will continue for one reason…prices are still way too high for many items…for example, 6 pieces of bread for 2 bucks (wtf?) 300 bucks for a plasic humidifier, etc. etc.

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