Japan at Risk For Deflation: Core CPI Unchanged
Arslan Butt • 1 min read
Core consumer prices across Japan held steady through July, denting expectations that the country was on its way towards economic recovery after bringing the pandemic under control and easing lockdown restrictions. Japan’s core CPI, including energy prices but excluding volatile fresh food prices, remained unchanged in July from a year ago.
The reading came in worse than expected, as economists were expecting core CPI to rise by 0.1% YoY during July instead. The weak figure once again raises the risk of Japan slipping into deflation with core CPI remaining unchanged in the previous month as well, and could force the BOJ to continue with its stimulus measures and ultra-low interest rates.
Meanwhile, the core core CPI which excludes food as well as energy prices increased to 0.4% YoY in July, similar to the last two months. Core CPI remained steady as a result of weakness in energy prices worldwide as a result of reduced demand due to the coronavirus pandemic, even as domestic consumption improved slightly.
The BOJ has forecast that consumer prices could fall by 0.5% through 2020 and continue to remain below its 2% target at least until 2023. Consumer prices remain under pressure on account of weakness in domestic consumption even as international demand also declines due to the pandemic.