"We need a comprehensive policy to fight deflation," Economic and Fiscal Policy Minister Heizo Takenaka said on Wednesday.
Bank of Japan Governor Masaru Hayami has also said that price declines are a key economic risk. "The bank will do its best to counter deflation and stabilize prices," Hayami told a parliamentary committee early this month. "We must closely examine the risk of a deflationary spiral." Still, the central bank's attempts to combat deflation by paring interest rates to close to zero and pumping trillions of yen into the money market to prod banks into lending has had little effect.
Even some consumers see the danger in falling prices.
"When it costs just ?280 to buy a bowl of beef and rice and clothes cost less to buy, this is good,'' said Hatsuko Yoshioka, who heads the Tokyo office of the Housewives' Consumer Union, which represents 391 consumer advocacy groups nationwide. "But if company profits fall, the government won't earn as much in taxes, so it will have to cut spending somewhere, whether that's medical benefits or pension payments." That prospect makes consumers save more and spend less, Yoshioka said, prompting companies to cut prices further.
Sasajima also worries, saying that as unemployment rises -- it reached a record 5.4 percent last month -- the mood of her northern hometown has deteriorated, and "you hear of more robberies." Still, "in terms of how much money I have to pay for my radio cassette recorder, it's good that prices have come down," she said.
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