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Economy in Brief

Consumer Prices Still Weak in Japan
by Carol Stone June 25, 2004

Analysts had projected that Japan's core CPI for Tokyo would finally stop falling in June. But it did not. It was down, just a little, but still down by 0.1% from a year ago. On the heels of this report, which also included widespread deflation in the national CPI for May, the monetary policy committee of the Bank of Japan voted unanimously to maintain their zero-interest rate policy. It had been thought that some subtle move away from the potentially limitless provision of liquidity that accompanies that rate target might have been forthcoming if the CPI finally stabilized. Such was not the case. And unlike most of the other major economies of the world, Japan is not yet facing a sudden new burden of inflationary pressure.

The deflation in Japan does seem to be dissipating. Clothing prices, for instance, rose sharply in Tokyo and several sectors are experiencing much less downward price pressure than they have been. Press reports indicated that some of the softness in the Tokyo numbers reflected sales promotions in electronics, ahead of the introduction of new models. This could well be just a transitory force, then, with recently firmer demand possibly allowing net price gains to show through "soon".

The last year-on-year rise in the national "general CPI" was in August 1999. In the headline series, the core rate in the Tokyo area, the last such increase was in August 1998. In the Japanese array of CPI data, the core is defined as the general CPI less fresh food.

% Changes June 2004 May 2004 Apr 2004 2003 2002 2001
General CPI, SA, mo/mo N.A. -0.2 -0.3      
  NSA, yr/yr N.A. -0.5 -0.4 -0.4 -0.3 -1.2
Core CPI, SA, mo/mo N.A. -0.2 -0.1      
  NSA, yr/yr N.A. -0.3 -0.2 0.0 -0.7 -0.9
Tokyo CPI, SA, mo/mo +0.2 -0.1 -0.1      
  NSA, yr/yr -0.1 -0.3 -0.3 -0.4 -0.3 -1.5
Tokyo Core CPI, SA, mo/mo -0.1 0.0 -0.1      
  NSA, yr/yr -0.1 -0.1 -0.1 -0.1 -0.7 -1.0
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