Surprising Decline in IP and Continued Deflation for Japan
Econintersect: Instead of a high-flying bug looking for a windshield, Japan is still looking more like a prehistoric animal sinking into a tar pit. The two newest pieces of 
economic data out early Friday 29 March show industrial output declining 0.1% in February (expectations had been for a gain of 2.6%. The IP (Industrial Production) data is month-over-month change. Core consumer prices deflated by 0.3% in February, far from the government target of 2% inflation. The overall consumer price deflation, including food and energy, was 0.7%. Consumer price data is year-over-year.
The latest data dampens the strength of argument from Bank of Japan governor Haruhiko Kuroda. Kuroda has urged going slowly with economic stimulus because of Japan’s high national debt. Newly elected premier Shinzo Abe is expected to renew his call for monetary easing to go along with the increased deficits he plans on the fiscal side for 2013. See 28 March 2013 GEI News story about the jousting between Kuroda and Abe.
The decline in core consumer prices is the fourth monthly decline in a row and continues the downward pressure on prices that has dominated the Japanese economy for two decades. The following graphic shows the CPI history for Japan since 1958.
Click on chart for larger image.
IP has been mostly negative since the mega-quake and tsunami in March 2011, with only a brief spurt to the upside in early 2012.
Click on chart for larger image.
IP has declined year-over-year for 9 months and the trend is accelerating to the downside.
The chart below IP data starting from 1979.
Click on chart for larger image.
Sources:
- UPDATE 1-Japan factory dip surprises, prices keep grinding down (Reuters, 28 March 2013)
- Japan hit by fall in factory output (Jonathan Soble, Financial Times, 29 March 2013)
- Japan: Kuroda vs. Abe (GEI News, 28 March 2013)
- Charts from Trading Economics.
