日銀リポート デフレ脱却には時間がかかる

The Yomiuri Shimbun (May. 3, 2010)
Escaping deflationary environment takes time
日銀リポート デフレ脱却には時間がかかる(5月2日付・読売社説)

When will the nation's persistent deflation come to an end? The Bank of Japan presented one answer to this question in its recent "Outlook for Economic Activity and Prices" report, in which the central bank envisages the prospects of economic growth and consumer price trends.

With respect to the outlook for consumer prices, the Bank of Japan maintained its projection that the core consumer price index for fiscal 2010 would fall 0.5 percent from a year earlier.
For fiscal 2011, however, the central bank revised its previous forecast, from a 0.2 percent drop to a 0.1 percent increase. If realized, it would be the first time in three years that the core CPI will have risen.

However, it is premature to state that the data enables us to see a way out of the deflationary environment. The government and the Bank of Japan should not become optimistic and must not relax their policies to ensure the nation's economy escapes from deflation.


Light at end of tunnel?

The Bank of Japan also projected in its report the possibility that prices would enter positive territory during fiscal 2011.

Meanwhile, the central bank predicts steady positive growth for the nation's real gross domestic product, with 1.8 percent growth in fiscal 2010 and 2 percent growth in fiscal 2011.

In view of the current economic and price conditions, however, the bank's projections appear to be somewhat optimistic.

The nation's economy continues to experience weakening prices, with supply exceeding demand by as much as 30 trillion yen. Consumers, who have become accustomed to deflation, continue to sit on their wallets, while retailers and manufacturers continue to engage in fierce price wars.

The government data showed the nation's core CPI fell 1.2 percent in March from a year earlier, the same rate as in February. The recovery in consumer prices has been marking time recently.

In March, prices of flat-panel TVs fell 36 percent while those of air conditioners dropped 21 percent from a year earlier, pushing down the entire CPI. The current deflationary environment is extremely stubborn. Even energy-saving electrical appliances that have been selling relatively well thanks to the government's subsidy program saw poor sales unless they were perceived to be bargains.


'Good' vs 'bad' escape

Meanwhile, gasoline prices rose 16 percent in March, reducing the overall fall in the CPI by 0.3 percentage point.

The increase in gasoline prices continued last month, while the costs of public utilities, including electricity and gas, are scheduled to be hiked in the future. Prices of raw materials, including iron and steel, and chemical fiber, also are on the rise.

One reason that the Bank of Japan revised its price projections upward is due to the growing trend of price increases for energy and other items related to natural resources, in line with rising prices in those categories internationally.

However, high prices for utilities and raw materials negatively impact the nation's economy. This is because companies' profits wane as firms cannot raise prices to desired levels amid severe competition.

This "bad escape from deflation" is problematic, whereas the "good escape from deflation" through increased demand is desirable.

Conquering deflation is still at the halfway point. Toward this end, the Bank of Japan should actively continue its monetary easing policy and should not hesitate to implement additional measures when necessary.

(From The Yomiuri Shimbun, May 2, 2010)
(2010年5月2日01時16分 読売新聞)

by kiyoshimat | 2010-05-03 10:00 | 英字新聞

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