Prices excluding fresh food slid 2.4 percent from a year earlier, topping July’s 2.2 percent decline, the statistics bureau said. The drop, the sharpest since the survey began in 1971, matched economists’ estimates.
Companies from Fast Retailing Co. to Sony Corp. are lowering prices to attract consumers who face record unemployment and plunging wages. A return to the deflation that the economy only shook off in 2005 may weigh on growth as consumers and companies cut back spending in anticipation that prices will keep falling.
The yen’s rally to an eight-month high also threatens to stunt the recovery by making Japanese exports more expensive and eroding the value of repatriated profits. Japan’s currency traded at 89.96 per dollar at 9:53 a.m. in Tokyo from 89.63 before today’s report and rose as high as 88.24 yesterday, the strongest since January.
Tokyo core consumer prices slumped 2.1 percent in September from a year earlier, also a record, the bureau said. Figures for the Japanese capital are released a month earlier than nationwide data, making them a harbinger of price trends.
Much of the drop in prices reflects last year’s peak in oil costs. Crude reached an unprecedented $147.27 a barrel last July, and has dropped more than 50 percent since then.
Even when excluding food and energy, consumer prices fell 0.9 percent in August, the same pace as July, which was the sharpest decline in seven years, the bureau said.
Sony slashed the price of its PlayStation Portable player in Japan by 15 percent to 16,800 yen, only three months after reducing its PlayStation 3 prices. Such moves, while spurring demand, may also eat into the company’s profits, which fell 53 percent last quarter from a year earlier.
To maintain profit margins while lowering prices, some retailers have introduced their own product brands. More than two-thirds of consumers said they intend to buy more private- label products, according to a Nikkei News survey.