Japanese Prices Continue to Slide
Japan’s consumer prices dropped for the fifth consecutive month in July, putting pressure on the government to expand its massive stimulus programme.
The data was worse than expected and marked the biggest annual drop in more than three years.
The consumer price index fell by 0.5% compared with a year earlier.
Tokyo has been trying to raise inflation for years to stimulate spending and boost the state of the economy.
The disappointing data comes with weaker-than-expected economic growth data released earlier this month, despite an aggressive spending policy by the government.
In July, Prime Minister Shinzo Abe announced the latest stimulus effort which is a massive package worth 28 trillion yen to stimulate spending.
Japan has been trying to boost consumer spending which makes up 60% of the economy.
The government’s policy of economic reforms (“Abenomics”) consists of a three –pronged fiscal, monetary and structural approach to lift the economy out of its slump.
However, despite three years of ‘Abenomics’, inflation has remained significantly lower than the central bank’s 2% goals.
Consistent weak household spending is to be blamed with a recent strengthening yen which has pushed down import prices.
Marcel Thieliant, senior economist at Capital Economics commented: “The Bank of Japan has recognised that there are considerable risks to its forecast of hitting its 2% inflation target in the coming fiscal year. We therefore continue to expect more stimulus to be introduced at the Bank’s September meeting.”