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03rd of July 2011
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Japan CPI rises for second consecutive month

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by Kay Mitchell

The Statistics Bureau has today revealed Japan’s core consumer price index (CPI) rose by 0.6% in May on an annual basis – the second consecutive monthly rise due to higher commodity prices.

The rise was higher than forecasts of a 0.5% gain and comes after the 0.6% rise in April – which represented the first in two years as the world’s third largest economy overcame deflation.

A short period of deflation (where prices fall rather than increase) is a serious threat to an economy because it deters consumers and businesses from spending in expectation of falling prices.

Deflation was a problem for Japan during its so-called “Lost Decade” in the 1990s in which the economy struggled with falling prices.

However, according to analysts, the CPI is expected to return to negative territory in July and the economy will continue to battle with deflation for some time.

In other news today, the Bank of Japan’s (BoJ) closely watched quarterly Tankan survey has revealed business confidence has plunged after March’s earthquake and tsunami.

The index turned negative for the first time in more than 12 months with companies gloomy about the future.

The key index fell to a reading of -9 from a positive reading of 6 in the last quarter – sinking by 15 points and represented the first negative reading in five quarters.

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News posted: July 1, 2011

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