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Japanese Consumer Prices: Fastest Slide in a Decade

The world's third largest economy continues to grapple with deflationary forces.

Indeed, Japan's core consumer prices dropped in November at their fastest pace in a decade.

Here's an excerpt from a Dec. 17 Reuters article:

[Japan's] core consumer prices, which exclude volatile fresh food costs, fell 0.9% in November from a year earlier....

It was the fourth straight month of falls and the fastest pace of year-on-year decline since September 2010.

While the drop was blamed largely on the government's travel discount campaign and weak energy prices, it underscored how sluggish domestic demand was in keeping a lid on prices and hobbling the recovery from a pandemic-induced slump.

"The resurgence in inflections will keep people home and an expected decline in winter bonus payments will prevent a pickup in consumption," said [the] chief economist at Norinchukin Research Institute.

"Consumer prices will keep falling heading into 2021."

This is all occurring despite previous stimulus efforts from the Bank of Japan.

Robert Prechter's 2020 edition of Conquer the Crash provides insight into why central banks the world over, including the U.S. Federal Reserve, will be powerless to stop deflation:

The Fed inflated the supply of dollars at a stunning 36% annual rate from 2008 to 2014....

Given knowledge of the Fed's inflating, many people would expect the Producer and Consumer Price Indexes to have been rising at a rate of 36% annually. But... the PPI's annual rate of change is stuck near zero and the CPI has been rising at only a 2% rate. Economists have had difficulty explaining why producer and consumer prices have been so sluggish. The short answer is that deflationary psychology is creeping toward gaining the upper hand, no matter what the Fed does.

Central Bank Lending and Government Borrowing are Failing to Generate Economic Growth

The economy has been sluggish both despite and because of record inflating by central banks and record spending by governments all over the world. High debt brings economic stagnation and ultimately deflation.

Japan had one of the strongest economies in the entire world, growing at a 9% rate for 20 years up to 1973, and then a pretty strong rate of about 4.5% through 1994. From there, it's averaged about 1%.

The reason Japan is in trouble was expressed in a November 1, 2012 headline from MarketWatch: "Japan Is in Worse Than a Deflationary Trap." But it's not worse than a deflationary trap. It's just a deflationary trap. Here's what the article says: "Policy makers have spectacularly failed. Brutal deflation persists. Japanese officials tried monetary stimulus, including zero interest rates and quantitative easing." Does that sound familiar? And here: "Past fiscal stimulus has ballooned the national debt to 200% of GDP." Does that sound familiar, too? And finally, "The most troubling aspect of Japan's malaise may be psychological." That's the key to the whole thing.