Japan Remains Mired In Deflation, Unemployment On The Rise Again

(RTTNews) -  Japan marked nine months of deflation in November while official data also showed that the nation's jobless rate is rising again, adding to worries that the recovery of the world's second largest economy is losing steam.

Japan's core consumer prices dropped 1.7% year-on-year in November compared to the 2.2% fall in the preceding month, the Ministry of Internal Affairs and Communications reported on Friday. That compared to expectations for a 2% decline. The annual rate of deflation has now decelerated for the third straight month.

Month-on-month, the core CPI, which excludes fresh food from the price basket, dropped 0.2% in November following the 0.1% fall in October.

BNP Paribas economist Azusa Kato said that the deceleration of the decline in core CPI was simply the result of a "technical error", namely the waning base effect from surging petroleum product prices through August of last year.

"Prices of petroleum products have actually fallen over the past two months, but diminished base-year effects associated with a sharp rise through August 2008 followed by a sudden retrenchment mean that the pace of year-on-year decline has actually slowed," he explained. "These technical factors aside, there is no indication whatsoever that deflationary pressure might be starting to abate."


November's CPI results are likely keep up the pressure on the Bank of Japan, which has been in a running feud with the government on how to tackle deflation. Earlier this month, the central bank said it was a "critical challenge" to overcome deflation and added that it "would not tolerate" annual prices at, or below, zero. The bank promised to keep interest rates low, but did not specify how it planned to combat deflation.

Meanwhile, core consumer prices in the Tokyo region for December, a good indicator of future movements in the price index, dropped 1.9% from a year earlier - the same rate of decline as in the previous month. Economists were looking for a 2% fall.

On a monthly basis, Tokyo core CPI dropped 0.2% in December, adding to the 0.1% slide in the preceding month.

Also on Friday, the Ministry of Internal Affairs and Communications reported that the unemployment rate climbed for the first time in four months in November. The jobless rate stood at a seasonally adjusted 5.2% in November, up from 5.1% in the previous month. That came in line with the consensus call of 5.2%.

In November, the unemployment rate was at 5.4% among males and 4.9% among females. The total number of unemployed persons declined to 3.31 million from 3.44 million. At the same time, the number of employed persons edged down to 62.60 million from 62.71 million in the prior month, while total labor force strength slid to 65.91 million from 66.15 million.