March 17, 2001 atimes.com

Japan

Tokyo finally says the 'd' word

TOKYO - The Japanese economy is suffering from moderate deflation, the government finally admitted in its monthly economic report for March released on Friday.

The Cabinet Office described the economic recovery as "stalling", and downgraded its economic outlook for the second consecutive month.

Deceleration of the US economy resulted in a less optimistic outlook for exports and production. The report also expressed concern about the outlook for capital investment.

The Cabinet Office defined the continued fall in prices as deflation, conceding for the first time that the Japanese economy is in a deflationary stage.

Among the categories used in assessing the economy, industrial production suffered the greatest downturn, dipping 4.2 percent month-on-month in January to a record low on a seasonally adjusted basis, according to revised figures released recently by the Ministry of Economy, Industry and Trade. The outlook for industrial production has also been "weakening", the report said. Last month's report was less pessimistic, saying merely that "the pace of growth has been slowing".

This month's report also lowered its assessment of prices, stating that the wholesale price index and consumer price index are both on a downtrend. Last month, the report described prices as "slightly weakening".

In January, the nationwide consumer price index, excluding perishables, dipped 0.5 percent from a year earlier. The domestic wholesale price index also fell.

After considering the decline in consumer prices since 1999, the Cabinet Office this week changed the definition of deflation to a continued fall in prices. The definition that had been used previously - economic stagnation accompanied by price declines - was coined in 1999 by the Economic Planning Agency, which was merged into the Cabinet Office.

The new definition focusses solely on price trends and disregards the direction of the overall economy

http://atimes.com/japan-econ/CC17Dh01.html

-- Martin Thompson (mthom1927@aol.com), March 16, 2001