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Prices dip again in Japan
By Alex Frew McMillan
TOKYO, Japan -- Domestic wholesale prices were flat in September, compared with the previous month, the Bank of Japan reported Tuesday. Compared with a year ago, prices were down 0.9 percent. That was the 24th straight month of decline. The rate that prices are going down slowed, though. They had dipped 1.0 percent in August and 1.2 percent in July, compared with a year ago. In September, electrical machinery, transport machinery and wood products all saw their prices dip. Electrical machinery posted the largest fall over a year ago, down 4.7 percent. "Electrical machinery is entering a phase of inventory accumulation now that stock has been adjusted and shipments have turned upward," Barclays Capital chief economist Mamoru Yamazaki wrote in a report. "This continuing price decline in electrical machinery, which fueled the economic turnaround, suggests domestic wholesale prices as a whole will remain under downward pressure," he added. Raw materials more expensiveBut raw material costs were higher in September, over August, with iron and steel and pulp and paper both up on inventory trends. Those price increases are also picking up pace, growth hitting an annual rate of 2.2 percent in September over August's 1.8 percent. Higher oil prices stemming from tension in the Arabian Gulf likely mean wholesale prices in Japan will continue to stem their slide. "With the negative output gap continuing to widen amid sluggish demand, however, the downward trend itself is unlikely to change," Yamazaki said. The government is also preparing a package of measures to fight deflation and expects to deliver a guideline to its plans in the middle of October. (Full story) Declining prices, wages and a depressed stock market have all hurt Japan's ability to extricate itself from recession.
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