Japan: Inflation eased in May to 0.2%

EcoFlash

Inflation fell in May to 0.2% from 0.5% in the previous month. This was related to slowing energy price inflation and falling prices for household durables due to technological development. Nevertheless, the economy is slowly emerging from deflation. Inflation excluding fresh food is forecast to return soon to positive territory and remain there till end 2013.

Consumer price inflation eased in May to 0.2% from 0.5% in the previous month. Excluding fresh food, the Bank of Japan’s preferred concept, inflation even fell just below zero. Moreover, excluding food and energy, inflation fell to -0.6%.

The decline in prices can be attributed to two main reasons. First, energy price inflation eased in May to 3.7% from 5.4% in the previous month. In addition, prices for household durables are on a declining trend. In May, they were 11% lower from a year earlier. This is partly related to technological developments. It is also due to last year’s switchover to digital television broadcasting, which boosted sales for flat screens. These have plummeted and producers and retailers are giving substantial discounts to reduce their stocks.

Nevertheless, the economy is slowly emerging out of deflation. In particular, price changes for goods that are regularly bought have entered positive territory. For this reason, the consumers’ inflation perception has been on a rising trend. Inflation is expected to increase gradually because of rising labour costs and, more importantly, increasing commodity prices.

Inflation excluding fresh food is forecast to return soon to positive territory and remain there till the end of the forecast horizon in 2013, although staying below the BoJ’s 1% objective.

Published On Fri, Jun 29 2012, 13:37 GMT Previous entries

Raymond Van Der Putten

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Expert in Japan, Australia, New Zealand, Benelux, Pensions and Long Term Forecasts.

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