October 1st, 2010
02:41 AM GMT
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Consumer prices in Japan extended their decline for an 18th straight month.

The core consumer price index, which strips out volatile fresh food prices, fell 1 percent in August from a year earlier. That compares to a decline of 1.1 percent in July.

"You've seen deflation pressure easing slightly for the past 12 months," said Richard Jerram, chief economist at Macquarie Securities in Japan. "But it's still a big problem."

Analysts say the country may remain mired in deflation because of the strengthening yen. A stronger yen is making imports cheaper to buy, giving retailers an incentive to lower prices in order to attract more customers.

The yen's rise has also been weighing heavily on Japan’s big exporters and undermining the country's fragile recovery.

An earlier report showed exports have been slowing for six straight month, mainly because a stronger yen and weakening overseas demand.

Despite the uncertainty, the country's labor market has been showing signs of improvement.

The jobless rate slipped to 5.1 percent in August from a previous reading of 5.2 percent. The reading was inline with expectations.

Last week the government said it was planning to introduce a supplementary budget of about $55 billion to pay for a new stimulus plan.

Jerram described the measures as nothing more than smoke and mirrors and won't have the impact needed to stimulate domestic demand. Part of the problem, he says, is Japan’s reliance on exports to boost growth rather than dealing with its domestic troubles, which is what's needed to turn the economy around.

"The government is struggling for good ideas on how to stimulate growth," said Jerram.

soundoff (4 Responses)
  1. carlo mau asam

    Well lets see what the future holds.. as an importer of vehicles I must say that our demand for RHD (right hand drive ) vehicles is still boosting a lot of the export from Japan in the caribbean and Latin America..check out http://www.tradecarview.com and see for yourself why it is still better and even cheaper to import your own.!

    October 1, 2010 at 4:47 am |
  2. J.P.

    I currently work in Japan and subsequently could not be happier with the current strength of the ¥. I however am immediately converting most of my savings into USD, in the sole fear that the government will once again attempt to manipulate the foreign exchange market, this time at a far greater scale.

    Japan is becoming increasingly desperate to reinvent its export market.

    Even with the latest currency intervention of the Ministry of Finance through the BOJ this September, then yen is back again at 83.440 to USD as of October 1st.

    I am considering pulling a significant portion of my savings from Yen and investing highly in the Yuan, as I truly believe that China might buckle under the possible economic sanctions underway with the Murphy-Ryan Bill, which ironically was passed by a bipartisan effort in the US HOR.

    Recently under pressure from the US, China also abandoned its fixed exchange rate to the dollar this June.

    If America can mobilize other key allies who also act as significant economic players to Chinese export market, then the PRC has no other choice then to abandon its currency manipulation and allow the inevitable raise in the value of the Yuan.

    Just my opinion, take it with a grain of salt, if not the whole shaker.


    October 1, 2010 at 6:13 am |
  3. j. williams

    thats what the future will be if their economy will continue to deflates and sagging the export business. try checking this site so you will see for yourself. the site is http://www.ccgains.com

    October 4, 2010 at 3:55 am |
  4. icons pack

    In it something is. Many thanks for the help in this question, now I wull know.


    September 23, 2012 at 5:25 pm |

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