Japan’s consumer prices slid at a faster pace in July and industrial production unexpectedly slumped, raising the danger that the world’s third-largest economy has slipped back into a contraction.
The benchmark price gauge, which excludes fresh food, fell 0.3 percent in July from a year before, putting the central bank’s 1 percent inflation goal further from reach, a government report showed in Tokyo. Industrial output fell 1.2 percent. A private measure of manufacturing for August was the lowest since the aftermath of the record March 2011 earthquake.
Today’s releases reflect diminishing demand overseas for the nation’s exports amid the European crisis and exchange-rate appreciation, and the end of incentives for vehicle purchases. With Prime Minister Yoshihiko Noda’s government today predicting it will miss a deficit-reduction target, pressure may rise on the Bank of Japan (8301) to expand stimulus and sustain the recovery.
“The risk of a contraction in the second half of the year is increasing,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo, who previously worked at the Bank of Japan. “The downside risks on the economy are increasing, and could push the BOJ to further expand its asset- purchase program next month.”
The Nikkei 225 (NKY) Stock Average headed for a second straight week of declines, and closed down 1.6 percent in Tokyo. The yen was at 78.54 per dollar, about 4 percent from its postwar high reached in October 2011. The currency has soared 47 percent in the past five years.
Read more: http://www.bloomberg.com/news/2012-08-30/japan-s-consumer-prices-fall-a-third-month-jobless-rate-at-4-3-.html
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