Global| Feb 27 2009Deflation Is Back!
Summary
Deflation strikes back -- Uh, oh… Japan’s prices are falling again. The chart of Japan’s Core CPI looks like the path of the ground hog on ground hog’s day. In this case it is not four more weeks of winter but another bout with [...]
Deflation strikes back -- Uh, oh… Japan’s prices are falling
again. The chart of Japan’s Core CPI looks like the path of the ground
hog on ground hog’s day. In this case it is not four more weeks of
winter but another bout with deflation that is in prospect. Japan’s
quantitative easing seemed to have been successful in dispatching
Japan’s deflation as inflation began to rise in 2008. Then as oil
prices plunged, as the yen soared and as financial crisis gripped the
global economy, Japan’s recession took hold and now deflation is back.
Just today Japan issued a report of a 10% Yr/yr drop in industrial
production and with dwindling consumer spending. The downturn fuels the
deflation and deflation fuels the downturn. Japan’s economy has been
performing badly enough that the yen has reversed its course and is now
depreciating. The near 50% drop in Japan’s exports yr/yr is a clear
demonstration of how much the global economic downturn is battering
Japan. But the re-emergence of Japan’s deflation is a bad sign and an
event that will make Japan’s recovery that much more difficult.
| Japan CPI Trends | ||||||||
|---|---|---|---|---|---|---|---|---|
| Jan-09 | Dec-08 | Nov-08 | 3-mo | 6-mo | 12-mo | Yr-Ago | Q-to-Date | |
| All Items | -0.4% | -0.5% | -0.4% | -5.0% | -3.1% | 0.0% | 2.8% | -5.0% |
| All items less food and energy-0.2% | -0.2% | 0.0% | -0.1% | -1.2% | -0.4% | -0.2% | 0.4% | -1.4% |
| Allitems except fresh food | -0.2% | -0.5% | -0.6% | -5.0% | -3.1% | 0.0% | 3.2% | -4.3% |
| Seasonally Adjusted By Haver | ||||||||
| Food& Beverage | -0.5% | 0.1% | 0.4% | 0.0% | 0.8% | 3.4% | 2.0% | -1.7% |
| housing | -0.1% | 0.0% | 0.0% | -0.4% | -0.2% | 0.0% | 0.0% | -0.6% |
| Clothing $ Persoanl | -1.2% | 0.0% | 0.1% | -4.2% | -1.8% | -0.9% | 3.6% | -6.7% |
| Education | 0.1% | 0.0% | 0.1% | 0.8% | 0.6% | 0.7% | 2.8% | 0.8% |
| Medical are | 0.6% | 0.1% | -0.4% | 1.2% | 0.4% | 0.1% | 0.8% | 3.3% |
| Misc | 0.0% | -0.1% | -0.1% | -0.8% | -0.4% | -0.1% | 2.4% | -0.6% |
| Reading & Rec | -0.9% | -0.1% | -0.2% | -4.9% | -1.9% | -1.3% | -2.0% | -6.2% |
| Transport&Comm | -1.2% | -2.1% | -2.7% | -21.8% | -16.7% | -6.3% | 10.8% | -19.5% |
Robert Brusca
AuthorMore in Author Profile »Robert A. Brusca is Chief Economist of Fact and Opinion Economics, a consulting firm he founded in Manhattan. He has been an economist on Wall Street for over 25 years. He has visited central banking and large institutional clients in over 30 countries in his career as an economist. Mr. Brusca was a Divisional Research Chief at the Federal Reserve Bank of NY (Chief of the International Financial markets Division), a Fed Watcher at Irving Trust and Chief Economist at Nikko Securities International. He is widely quoted and appears in various media. Mr. Brusca holds an MA and Ph.D. in economics from Michigan State University and a BA in Economics from the University of Michigan. His research pursues his strong interests in non aligned policy economics as well as international economics. FAO Economics’ research targets investors to assist them in making better investment decisions in stocks, bonds and in a variety of international assets. The company does not manage money and has no conflicts in giving economic advice.
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