Japan Risks Deflation as CGPI Sees Steep Decline in April

Japan Risks Deflation as CGPI Sees Steep Decline in April

Posted Friday, May 15, 2020 by
Arslan Butt • 1 min read

Wholesale prices in Japan experienced the sharpest fall in almost four years during April, raising fears about a possible deflation hitting the economy amid the ongoing coronavirus pandemic. The corporate goods price index (CGPI), a key measure of how much companies charge each other for goods and services, fell by 2.3% YoY in April, worse than last month’s 0.4% decline and economists’ forecast for a 1.6% decline.

This was the steepest fall on CGPI seen since November 2016 and was driven by a sharp decline in prices for oil and nonferrous metals. Meanwhile, domestic final goods prices were down by 2.5% YoY for the month of April.

Despite the several stimulus measures unveiled by the government and the BOJ, Japan’s economy is expected to slip into a severe recession as a result of the pandemic which has severely impacted both domestic demand as well as international trade. With rates already in the negative territory, the BOJ has limited tools for monetary easing, but still announced more risky asset purchases and increased buying of government bonds in April.

Notwithstanding these measures, the recent figures indicate that consumer inflation in Japan is far from the central bank’s 2% target, and is likely to remain under pressure in the coming months.

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