Japan Inflation Slows

Japan’s inflation slowed for a second month in October as oil and commodity prices tumbled, providing relief to cash-strapped households in a recession.

Consumer prices excluding fresh food rose 1.9 percent from a year earlier, slower than the 2.3 percent pace in September, the statistics bureau said today in Tokyo.

Oil and grain prices, which drove inflation to a decade high last quarter, will keep falling and may drag the core index into negative territory next year, economists say. Lower costs alone may not spur spending by households, whose sentiment has slumped to the worst on record as companies fire workers and keep a lid on wages.

Core prices in Tokyo, where one in 10 Japanese lives, rose 1.1 percent in November from a year earlier, after climbing 1.5 percent in October, today’s report showed. Economists expected a 1.3 percent gain. Price trends in the capital tend to indicate future changes in nationwide inflation.

Other reports also show inflation is easing. Wholesale price gains slowed for a second month in October and costs companies pay for services slid for the first time in two years.

Crude oil has lost more than 60 percent its value since exceeding $147 a barrel for the first time on July 11. Soybeans, corn and wheat have also slumped from records as the global slowdown reduced demand.

Some retailers, taking advantage of the yen’s gain and cheaper raw materials, are reducing prices of daily necessities to stimulate consumer spending, which accounts for more than half of the economy.

Japan Inflation Slows

TradingEconomics.com, Bloomberg.com
11/28/2008 8:54:11 AM