Consumer Prices Fall for 17th Month as Yen's Advance Lowers Import Costs
Japan's Consumer Prices Fall as Economic Growth Slows
Tomohiro Ohsumi/Bloomberg
A shopper pushes a shopping cart through the imported fruit section during a "soaring yen" sale at Seven & I Holdings Co.'s Itoyokado supermarket in Tokyo. Ito-Yokado offered discounts on dozens of imported food and household goods including U.S.-grown avocados, Chilean-salmon and Australian beef.
A shopper pushes a shopping cart through the imported fruit section during a "soaring yen" sale at Seven & I Holdings Co.'s Itoyokado supermarket in Tokyo. Ito-Yokado offered discounts on dozens of imported food and household goods including U.S.-grown avocados, Chilean-salmon and Australian beef. Photographer: Tomohiro Ohsumi/Bloomberg
Aug. 26 (Bloomberg) -- Geoffrey Yu, currency strategist for UBS Ltd., talks about hints from Japanese policymakers they may curb the advance of the yen. Yu also discusses the prospect of the Swiss National Bank stepping in to counter gains in the franc. He speaks with Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)
Japan’s consumer prices fell for a 17th month as economic growth cooled and the yen’s advance lowered import costs.
Prices excluding fresh food slid 1.1 percent in July from a year earlier, the statistics bureau said today in Tokyo, matching the median estimate of 24 economists surveyed by Bloomberg.
Japan’s economy barely grew in the second quarter as consumption stagnated and exports slowed, prompting companies from Barclays Capital to Nomura Securities Co. to cut their growth projections. Combined with weakening demand, the yen’s advance is also entrenching deflation by making imports cheaper.
Price pressures will ease, “but the climb out of deflation will be extremely slow,” Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co. in Tokyo, said before the report.
The yen’s gain drove stock prices to a 16-month low this week, putting pressure on the Bank of Japan and government to implement measures to safeguard the export-dependent recovery.
The Japanese currency has advanced 6 percent against the dollar in the past three months, prompting heads of Japan’s three largest business lobbies to call for policy actions to stabilize foreign-exchange rates.
Finance Minister Yoshihiko Noda this week said Japan stands ready to take “appropriate action” to stem the yen’s gain, his strongest comment on the yen to date. The central bank will probably ease monetary policy to help shelter the economy from the damage of a stronger yen, said economist Junko Nishioka.
Projection Downgrade
“The bank is highly likely to downgrade its projections for both growth and prices” in its semi-annual economic outlook in October, said Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo. “It wouldn’t come as a surprise if it decides to take some form of action in anticipation of that.”
The central bank’s policy-setting board will next meet on Sept. 6-7. BOJ policy makers predicted in July core prices will increase 0.1 percent in the year ending March 2012 after falling 0.4 percent.
Japan’s growth slowed to an annual 0.4 percent pace in the three months ended June 30, the weakest expansion in three quarters.
Retailers are offering discounts of imported food and household items to encourage consumers to loosen purse strings.
McDonald’s Holdings Company (Japan) Ltd., the Japanese unit of the world’s biggest restaurant chain, this month cut the price of its Big Mac after Japan’s three biggest beef-bowl restaurant chain?--?Yoshinoya Holdings Co., Matsuya Foods Co. and Zensho Co.?--?slashed prices.
Offer Discounts
Supermarket chains Aeon Co. and Ito-Yokado Co. this month offered discounts on dozens of imported food and household goods, including U.S.-grown avocados, Chilean-salmon and Australian beef.
Core price declines have steadily moderated after peaking in September, except in April, when the government started waiving high school tuition fees to support households.
“Though price declines have gradually eased, their declines are still large,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. “Downward pressure resulting from the deteriorating output gap is persistent.”
To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net
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