The core consumer prices in Japan declined for seventh consecutive month in September, as deflation amounted to 0.5% yoy. The index of core inflation includes energy but no fresh food. The consumer spending shrank in September, supporting the assertion of the central bank that will need time while inflation accelerated to the target level of 2%. The consumer spending decreased by 2.1% yoy, which is the seventh consecutive decline, although the unemployment rate fell to 3%.
Although the weak economy data are not surprising, they continue the series of disappointing indicators that put the Bank of Japan under pressure to continue its aggressive program of incentives.
Another index, which exclude energy and food prices, showed that inflation remained unchanged for a third consecutive month, probably as a result of poor spending and the strong JPY, which lowers import prices.
However, the decline in energy prices is becoming more moderate and they decreased by 8.4% yoy in September, which is significantly slower than the drop from 10.2% during the previous month.
According to the analysts, the companies are finding it difficult to raise prices because demand is weak. The growth in household income remains modest and people are not sure that the economic outlook will improve, which in turn causes them to refrain from spending.
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