TOKYO, July 25 - Consumer prices in Japan fell for the 45th straight month in June, underlining the problems that the government and central bank face in taming deflation. Japan's core nationwide consumer price index (CPI) fell 0.4 percent in June from a year earlier, government figures showed on Friday. That was exactly as forecast by a poll of 19 economists and followed a drop of the same magnitude in May.
Some economists drew comfort from the fact that the figures indicated deflation was not getting any worse and had even moderated from the near one percent falls of a year ago. "This rate of decline is a symptom of a weak economy, but it's not big enough by itself to be a big worry," said Peter Morgan, chief economist at HSBC Securities. "The basic message is that it's not that bad." Deflation cuts into company profits and worsens the bad loan situation at banks by making the debt burden effectively larger. It also means cheaper goods for consumers, though with average wages also falling the benefits are not felt by all. The government has declared that deflation is Public Enemy No.1 and has called on the Bank of Japan (BOJ) to help it. The BOJ has said it will continue with its policy of flooding the money markets with cash until price changes stabilise at or above zero percent, though bank insiders have recently conceded that this may take some time.
A survey of consumers released by the Cabinet Office earlier this week showed a slight rise in the number of respondents feeling that deflation was not coming to an end. The nationwide core CPI, which excludes volatile prices of fresh food, fell 0.1 percent from May on an unadjusted basis, the Ministry of Public Management, Home Affairs, Posts and Telecommunications said. Core CPI for the Tokyo area in July fell 0.4 percent from a year earlier, matching a median forecast.///