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Japan moves back into deflation Japan moves back into deflation
(about 4 hours later)
Japan's economy has fallen back into deflation for the first time in more than a year, new data for March shows.Japan's economy has fallen back into deflation for the first time in more than a year, new data for March shows.
Gloomy figures also showed that the country's unemployment rate moved to a four-year high of 4.8% in the month.Gloomy figures also showed that the country's unemployment rate moved to a four-year high of 4.8% in the month.
Meanwhile the number of available jobs in the world's second biggest economy has fallen to a seven-year low.Meanwhile the number of available jobs in the world's second biggest economy has fallen to a seven-year low.
The latest news comes a day after figures showed industrial output in Japan rose in March by 1.6%, the first production rise in six months.The latest news comes a day after figures showed industrial output in Japan rose in March by 1.6%, the first production rise in six months.
They don't have a job for us, they're saying 'we'll give you a little money, but don't come back. Bye bye' Wellington Shibuya From Brazil to Japan and back again They don't have a job for us, they're saying 'we'll give you a little money, but don't come back. Bye bye' Wellington Shibuya From Brazil to Japan and back again class="" href="/1/hi/business/7955931.stm">Japan's 1990s battle with deflation
On Thursday the Bank of Japan said GDP would shrink by 3.1% in the year to March 2010, compared to an earlier forecast of 2%, but it has argued that a recovery will begin in 2010.On Thursday the Bank of Japan said GDP would shrink by 3.1% in the year to March 2010, compared to an earlier forecast of 2%, but it has argued that a recovery will begin in 2010.
But in its latest update earlier this week it also warned that consumer prices will fall by 1.5%, pushing Japan into deflation.But in its latest update earlier this week it also warned that consumer prices will fall by 1.5%, pushing Japan into deflation.
Price cutsPrice cuts
The number of unemployed has jumped by 670,000 over the past 12 months, and now stand at their highest level since August 2004.The number of unemployed has jumped by 670,000 over the past 12 months, and now stand at their highest level since August 2004.
With more people out of work and falling household incomes, that could push down consumer prices further as companies try to attract people into buying their goods by cutting prices.With more people out of work and falling household incomes, that could push down consumer prices further as companies try to attract people into buying their goods by cutting prices.
The core consumer price index, which excludes volatile prices of fresh fruit, vegetables and seafood but not oil prices, fell 0.1% in March from a year earlier.The core consumer price index, which excludes volatile prices of fresh fruit, vegetables and seafood but not oil prices, fell 0.1% in March from a year earlier.
The Bank of Japan has forecast two years of deflation, which stalked the Japanese economy in the 1990s.The Bank of Japan has forecast two years of deflation, which stalked the Japanese economy in the 1990s.
'Weak consumption''Weak consumption'
Analyst Takeshi Minami, chief economist of Norinchukin Research Institute said the price drops will accelerate.Analyst Takeshi Minami, chief economist of Norinchukin Research Institute said the price drops will accelerate.
"Deflation will be damaging to the economy. Companies will have difficulty increasing profits, and their effective burden from borrowing money will increase," he said."Deflation will be damaging to the economy. Companies will have difficulty increasing profits, and their effective burden from borrowing money will increase," he said.
"With job conditions worsening, consumption will remain weak. As such, downward pressure from weak demand on consumer prices will continue as a trend.""With job conditions worsening, consumption will remain weak. As such, downward pressure from weak demand on consumer prices will continue as a trend."
Annual consumer inflation in Japan hit a decade high of 2.4% in July and August last year.Annual consumer inflation in Japan hit a decade high of 2.4% in July and August last year.
Action neededAction needed
Meanwhile Japan's "core-core" inflation index, which strips out energy and food prices, fell 0.3%.Meanwhile Japan's "core-core" inflation index, which strips out energy and food prices, fell 0.3%.
"As we head into summer, the scale of the fall will increase," said Yoshikiyo Shimamine, chief economist at Dai-Ichi Life Research Institute."As we head into summer, the scale of the fall will increase," said Yoshikiyo Shimamine, chief economist at Dai-Ichi Life Research Institute.
"Some sort of economic policy will be needed to stimulate consumption. The Bank of Japan may also have to really look into doing something to stop price deflation.""Some sort of economic policy will be needed to stimulate consumption. The Bank of Japan may also have to really look into doing something to stop price deflation."
On Monday, the government submitted its plans to the Diet for its latest stimulus package, worth 15 trillion yen ($155bn, £105bn).On Monday, the government submitted its plans to the Diet for its latest stimulus package, worth 15 trillion yen ($155bn, £105bn).
Car sales fallCar sales fall
Japan has been hit badly by the downturn because worldwide demand has collapsed for its cars and electronics goods.Japan has been hit badly by the downturn because worldwide demand has collapsed for its cars and electronics goods.
Vehicle sales in Japan fell 28.6% in April from a year earlier to 166,365, the Japan Automobile Dealers Association said on Friday.Vehicle sales in Japan fell 28.6% in April from a year earlier to 166,365, the Japan Automobile Dealers Association said on Friday.
Sales at Toyota, excluding the Lexus brand, fell 32.%, and those at Nissan dropped by 38.7%. But Honda bucked the trend and saw its sales increase by 4%.Sales at Toyota, excluding the Lexus brand, fell 32.%, and those at Nissan dropped by 38.7%. But Honda bucked the trend and saw its sales increase by 4%.
The April figures marked the ninth successive month of year-on-year declines.The April figures marked the ninth successive month of year-on-year declines.