Japan consumer prices log first drop in more than 3 years

TOKYO, Japan – Consumer prices in Japan fell for the first time in more than 3 years last month, official data showed on Friday, May 22, dragged down by the coronavirus pandemic and collapsing oil prices.

Core prices in April, excluding volatile fresh food, slipped 0.2% from a year earlier, reversing a rise of 0.4% in March, according to the internal affairs ministry.

It was the first drop in 40 months, the ministry said, and larger than a 0.1% drop predicted by economists surveyed by Bloomberg.

Month-on-month, prices fell 0.5% following a drop of 0.1% in March.

“Corona containment evaporated prices pressures,” said Capital Economics economist Tom Learmouth.

Japanese inflation will “turn deeply negative over the coming months as services inflation and energy inflation continue to fall sharply,” he said in a note.

Energy costs fell sharply year-on-year reflecting lower gasoline and oil products prices, while prices also dropped in the tourism industry hit hard by the outbreak of the new coronavirus.

Hotel fees and foreign travel prices sank while the cost of durable goods edged down as consumers stayed home amid the virus woes. School fees also fell.

Government data on Monday, May 18, showed Japan had dived into its first recession since 2015 in the 1st quarter of the year and some economists warned the worst was yet to come.

Even before the virus outbreak, the central Bank of Japan had spent years struggling to achieve a 2% inflation target, as consumer spending remained slack despite the bank’s massive credit easing.

The bank is holding an extra policy meeting on Friday to discuss funding measures for smaller companies.

But central bank chief Haruhiko Kuroda said last week that he did not expect Japan to be “trapped in a deflationary situation.”

“Inflation rates in this fiscal year 2020 will be negative, but in fiscal 2021 and ’22 inflation rates will be positive,” he said at a Financial Times forum. – Rappler.com