Sat, Sep 26, 2015 - Page 15 News List

Deflation threat remains in Japan


Japan inched back into deflationary territory last month as lower oil prices pulled core inflation excluding volatile food prices lower.

The core consumer price index slipped 0.1 percent after remaining flat in July. The “headline” inflation rate, which includes both food and energy data, was flat at 0.2 percent.

It was the first time the core inflation measure had dipped lower since the central bank launched massive asset purchases that are pumping ¥80 trillion (US$670 billion) a year into the economy in a bid to push prices higher.

With oil prices below US$50 a barrel, upward pressure on prices has eased, hindering those efforts. The government has made achieving an inflation rate of about 2 percent a key aim of its strategy for forcing the world’s third-largest economy out of the deflationary doldrums that it says is stifling growth.

Excluding both energy and food prices, the price index rose 0.8 percent last month, compared with 0.6 percent in the previous two months. Theoretically, expectations of higher inflation would lead families and businesses to step up spending to beat price increases. However, companies have used massive cash piles accumulated thanks to record profits to invest overseas while consumers have remained relatively frugal.

Japanese Prime Minister Shinzo Abe on Thursday announced an update of his economic policies, setting a target for a ¥600 trillion economy.

Recent corporate investment figures were likewise worse than expected. In a news conference on Thursday, Abe did not dwell on those harsh realities.

“Tomorrow will definitely be better than today,” Abe said on national television. “From today, Abenomics is entering a new stage. Japan will become a society in which all can participate actively.”

Apart from his ¥600 trillion GDP target, Abe says he is determined to ensure that 50 years from now, the Japanese population, which is 126 million and falling, has stabilized at 100 million.

He also set a target for increasing the birth rate to 1.8 children per woman from the current very low rate of 1.4.

Abe said his new “three arrows” are a strong economy, support for child rearing and improved social security, to lighten the burden of child and elder care for struggling families.

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