Japan’s consumer prices drop a bit in December

Tokyo, Jan 28 (IANS) Japan’s core consumer prices fell 0.1 percent in December 2011 from a year earlier, marking the third consecutive month of decline with deflation expected to linger this year as energy prices fluctuate and the eurozone debt crisis impacts global economic activity.

Consumer prices, excluding fresh food, dropped 0.1 percent in December from a year earlier to 99.6 against the 2010 base of 100, Japan’s Ministry of Internal Affairs and Communications’ data showed.
While the decline was in line with median economists’ forecasts, the ministry also pointed to downside pressures on prices stemming from the yen’s appreciation and slowing demand from overseas economies, which has caused exports to wane, reported Xinhua.

Japan posted its first annual trade deficit since 1980 Wednesday, due to the affects of the March earthquake and tsunami and the yen’s appreciation versus its major counterparts, the finance ministry said.
The deficit stood at 2.49 trillion yen ($32 billion) in 2011, marking the first annual deficit in 31 years.
In addition, the Bank of Japan said this week it had lowered its outlook for consumer prices for the year ending March 31, cut its growth forecast for fiscal years 2011 and 2012, while the finance ministry indicated that Japan could be headed for a eurozone-style of debt crisis.
“We can’t foresee the end of deflation. Consumer prices face downward pressures from European debt woes and a strong yen and there are a lot of uncertainties ahead,” said Tatsushi Shikano, senior economist at Mitsubishi UFJ Morgan Stanley Securities Co.
Other strategists pointed to external pressures as also severely affecting prices and deflation here and warned that deflation could continue to linger and push prices down for longer than previously projected.
“The stagnation of other developed countries is likely to push back the timing of Japan beating deflation from the mid-2010s as originally thought to the late 2010s,” said Takeshi Minami, chief economist at Norinchukin Research Institute.