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.
(CNN) – A key reading on business sentiment shows that optimism is on the rise in the country’s business sector. The closely watched Tankan survey is out, and it shows – for the first time in a long time – the country's big businesses are feeling good about the state of the economy.
The quarterly survey had a reading of plus one. Most economists were expecting a reading of minus four. That means optimists outnumber pessimists.
That’s in contrast to negative numbers out of Japan earlier this week, led by news that unemployment inched upward in May. Still, the results will likely come as welcome relief, particularly to exporters who have been hammered this week by a stronger yen.
Meanwhile, Chinese state media is reported that China’s Purchasing Managers’ Index (PMI) was at 52.1 percent. That’s down from 53.9 percent in May, a sign China’s red-hot economy is starting to cool.
The tit-for-tat battle between Beijing and Google may be getting the headlines today, but it’s only an overture for the real battle brewing between China and the West.
On Capitol Hill, a group of lawmakers stood before reporters last week and warned about the evils of China’s undervalued currency, the yuan. Armed with new legislation to punish China, Democratic Senator Charles Schumer said the U.S. was ‘fed up’ with Beijing’s policies, which he says is costing the U.S. jobs, hampering the recovery and fueling its massive trade deficit.
The new bill was the latest in a series of recent and very public moves intended to press China to raise the value of the yuan.
But will these pressure tactics succeed? Probably not. If there is one thing Beijing has been consistent about, it’s that it rarely bows to foreign pressure, especially on issues affecting its economy. And any move to appease the U.S. would be interpreted as a sign of weakness, which Beijing has been reluctant to show.
And what if China did act? Would that solve the problems facing the U.S. economy? Again, probably not.
As economist Stephen Roach of Morgan Stanley said recently while being interviewed on another network, the U.S. isn’t facing a ‘China problem,’ but rather a domestic one. And targeting China is the result of Washington refusing to look into the mirror.
Other economists have also said a stronger yuan will do little to address a high U.S. unemployment rate or a massive trade deficit. And if anything, a stronger yuan would likely do nothing more than stoke U.S. inflation.
And don’t underestimate the weight behind China’s threats to retaliate, should the U.S. follow through with sanctions. Like it or not, China is becoming the driver of the global economy. And that has huge implications for America Inc. With companies like General Motors and Boeing increasingly looking to China for business, a warning from China should give reason to worry.
In fact, signs of a worsening political relationship may already be working its way into business relations. A survey from the American Chamber of Commerce showed a growing number of U.S. companies say they feel unwelcome in China and face discriminatory government policies.
There is little to be hopeful about as trade tensions escalate. The next big volley will likely come April 15th. That's when the U.S. Treasury is to consider whether to label China a currency manipulator in its semi-annual report. And if many lawmakers on Capitol Hill have their way, they just might.
Tune in to CNN on any given day, or to any other network for that matter, and there’s a good chance Toyota’s recall troubles will be near the top of the newscast. Whether it’s sticky gas pedals, bad brakes or new government investigations, the world’s top automaker has given news media plenty of material.
Media coverage has been intense , with much of the focus on what Toyota knew, when, and why they were so slow to react. What started as a recall has turned into a full-fledged scandal. And all the attention is raising questions about whether the company, and Japan for that matter, is being treated fairly.
The issue is clearly on the minds of some in Japan. Government minister Mizuho Fukushima said in an interview with Bloomberg News last week if Toyota had responded sooner, it wouldn’t have resulted in Japan and Toyota bashing. There are those in Japan who suggest the U.S. response was really an attempt to discredit Japanese car makers and boost domestic ones.
True, Toyota’s troubles seem to have evolved far beyond automotive shortcomings. They’ve evolved into a PR disaster. Lawsuits have been filed, government investigations are underway, and U.S. lawmakers have jumped into the fray.
It shouldn’t be a surprise that discussions about Toyota’s recent woes have moved beyond the cars themselves. Companies can be more than just a business. Take the recent takeover battle between Kraft and Britain’s Cadbury. For some in the UK, Cadbury was more than just a chocolate maker, it was an icon – and they were less than thrilled about a U.S. corporate giant swallowing it up. In Japan, Toyota is more than just a car maker. It’s a company that symbolizes the nation’s rise to economic might – a pillar of Japan Inc.
But underneath the politics, the rhetoric and the pride , there is something that shouldn’t be forgotten. Recalls can be serious business, especially if the problems raise safety concerns. And, unfortunately for Toyota, these problems do. Is Toyota the victim of a bandwagon bashing? Maybe. In the end does it really matter? No.
Toyota may be a Japanese company, but it also is a global company operating in an age of 24-hour news cycles, Twitter and Facebook. To maintain its position as a global leader, it must maneuver in the modern media age with same drive that turned it into the largest automaker in the world.
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