TOKYO • Japan’s core consumer prices fell at their fastest pace in almost four years last month, dragged down mostly by government-sponsored discounts for domestic travel aimed at supporting the battered tourism sector.
The weak consumer price data comes after Bank of Japan governor Haruhiko Kuroda said on Thursday it would monitor not just price trends but job growth in guiding policy, signalling a readiness to ramp up stimulus if job losses heighten the risk of deflation.
Japan’s new Prime Minister Yoshihide Suga on Wednesday pledged to contain Covid-19 and retain his former boss’ “Abenomics” growth policies while pushing reforms such as deregulation and digitalisation.
The core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices, fell 0.4 per cent last month from a year earlier, government data showed yesterday. That compared with the median market forecast for a 0.4 per cent decline and a flat reading in July and matched the level seen in November 2016.
The main factor for the fall in the core CPI was a price decline in accommodation and hotels after the government launched subsidies for national travel discounts from late July to revive pandemic-hit tourism.
Prices of accommodation fell 32 per cent last month from a year earlier, the index showed.
“Downward pressure on consumer prices will likely continue and the core CPI index could fall to around 1 per cent year on year later this year,” said chief economist Yoshiki Shinke at Dai-ichi Life Research Institute.
He said the travel campaign will continue to weigh on accommodation while the boost to prices from a sales tax hike implemented last October will disappear later this year.
Meanwhile, downward pressure on prices is broadening from the hit to demand caused by the pandemic.
The so-called core-core price index, which excludes food and energy prices and is closely tracked by the central bank as a narrower gauge of inflation, fell 0.1 per cent last month, the first fall since March 2017. In July, the index gained 0.4 per cent.
Mr Shinke said: “There is also a possibility that weak demand triggered by the coronavirus outbreak could push down consumer prices going ahead, though we haven’t seen significant impact on consumer prices so far.”
The economy shrank an annualised 28.1 per cent in April-June, its biggest postwar contraction.
Analysts see the reopening of businesses after a nationwide shutdown as supporting the economy, but companies and consumers remain cautious about the coronavirus outbreak and the pace of recovery may be limited.