Japan prices fall for 23rd month

TOKYO: Consumer prices in Japan went south to the 23rd consecutive month in January as deflation kept their position in second place in the world three economies.
But the pace of decline slowed for the fourth straight month because of the recent upward March of food and fuel prices worldwide.
the main consumers of the country's price index, which excludes fresh food, slipped 0.2 percent from a year earlier, the government said Friday.
The result is slightly better than the average market forecast Kyodo News Agency at 0.3 per cent fall.
Deflation is one of the key challenges facing the Japanese economy, which is struggling to keep his recovery on track.
While lower prices increase the purchasing power of the individual, they are usually bad for the economy as a whole. He is eating into corporate profits and could lead to job and wage decreases. This also means that even at zero, real interest rates are too high.
In his speech earlier this month, the central bank of Japan said that the extended deflation in the country since late 1990 due to the long-term downtrend in the growth potential in Japan.

"If the growth rate continues to decline for a long period, people's expectations for future revenue growth is reduced, and firms and households to restrain their spending," Bank of Japan Governor Masaaki Shirakawa told.

The Central Bank set its key interest rate almost to zero, and undertakes to maintain its easy monetary policy until deflation disappears. It said the CPI growth should commence in the near future and forecast 0.3 percent growth in the fiscal year to March 2012.
This is not necessarily a good thing, if its growth is mainly the result of higher raw material costs instead of higher wages.
Companies pass on higher costs to customers, which could cool consumer demand, which would then hurt the overall economy.
National energy prices, which includes diesel and kerosene rose 4.7 percent in January, the ministry said in its report.
Preliminary core CPI for Tokyo - is considered a broad indicator of price trends for the country - fell 0.4 percent.
This suggests that the rise in commodity prices still make a significant impact on consumer prices.
Goldman Sachs economist Chiwoong Lee said that because of the complex industrial structure in Japan, it takes about six to 12 months for the global growth in commodity prices to reach Japanese consumers.
"There are so many brokers who are usually to be absorbed on the way to some extent," he said in a note to clients.
But this time lag may have gotten shorter since the last financial crisis, which reduced the capacity of companies to absorb price increases.