Japan’s Inflation Stalled for a Second Month


Japan’s consumer prices failed to rise for a second month in February as the nation’s recession deepened.

Prices excluding fresh food were unchanged last month from a year earlier, the government’s statistics bureau said today in Tokyo. The number matched the median forecast of 31 economists surveyed by Bloomberg News.

An unprecedented drop in exports is forcing companies to fire workers, depressing wages and consumption and pushing the nation closer to its worst recession in the postwar era. A shrinking economy may herald a return to the deflation that plagued the nation for almost a decade until 2005.

Bank of Japan Governor Masaaki Shirakawa said this week that core prices are on the verge of falling and that policy makers are committed to preventing the economy from falling into a deflationary spiral.

During Japan’s last bout with deflation that began a decade ago, bankruptcies surged and the jobless rate advanced to a postwar high. Weak consumer spending prompted companies to lower prices, eroding profits and forcing them to cut wages. Deflation is commonly defined as a sustained decline in prices.

The world’s second-largest economy shrank an annualized 12.1 percent last quarter, the fastest pace since 1974.

The so-called output gap, a measure of the difference between supply and demand in the economy and a measure of inflation, fell 4.1 percent in the three months ended December 31, the most since 2003.

A collapse in exports may push sentiment among the nation’s largest manufacturers to the lowest level since 1975, triggering more investment cuts and job losses, economists expect the central bank’s quarterly Tankan survey to show on April 1.

Consumer prices were at a decade high in August amid a surge in energy and commodity prices. Crude oil has lost half of its value in the past year.


TradingEconomics.com, Bloomberg
3/27/2009 10:53:54 AM