Japan's inflation rate falls in January on lower energy costs

The inflation rate might have fallen, but I'm still seeing high prices at the supermarket. Falling along with the inflation rate are the number of coins in my purse.

Household spending fell by 0.3% in January from the month before and by 5.1% from a year earlier, suggesting the recovery in private spending remains sluggish & unemployment rose to 3.6% up 0.2% - Abenomics at work !

Another indication of the triumphant success of our Dear Leader's bold economic reform.

I'm waiting for the 'Easing and Supplement Finance Law 2015' which directly assists all Workers in Japan with salaries of less than 200,000 yen.

Just what do they do in the Gikai ?

Japan’s core inflation rate edged lower in January as lower crude oil prices reduced energy costs, while weak retail sales and employment data underscored the fragility of the recovery of the world’s third-largest economy.

“Firms predict a much smaller 0.2% month-on-month increase in February followed by a 3.2% month-on-month drop in March. These forecasts tend to overstate the future strength of production, so we may see even bigger falls,”

Hey, StormR, is this the "more good news about the economy" that you were predicting would be coming shortly? When are you going to realize, like some14some and others, that all the government spin in the world cannot change the basic fundamentals of a seriously flawed economy and a policy that was nothing more than good-old LDP pork-barrel spending wrapped in a new coat, and cleverly called "Abenomics" to make it sound sexy?

It is good they excluded food and especially butter as butter is going up by 5 to 9% in cost in April and reduced in size by 10% in May. . . if you can find it.

I do not see any real inflation outside the food sector.

Solution. Print even more money. so banks can lend to companies to buy overseas assets.

The unions need to get the 4% payrises they have been talking about.

"Household spending fell by 0.3% in January from the month before and by 5.1% from a year earlier,"

The year earlier was compared to the surge right ahead of the consumption tax hike. A third of a percentage point is nothing to get worked up about. LOL. The inflation rate is still up, a point that many readers seem to have missed, over 2%.

JeffLeeFeb. 27, 2015 - 04:57PM JST

The inflation rate is still up, a point that many readers seem to have missed, over 2%.

For someone who claims to have graduated with an economics degree and works in the financial industry, you are way off mark

You haven’t included the tax April 2014 increase into the statistics.

If you had, you would realize that the core consumer-price index rose a marginal 0.2 per cent from a year earlier in January.

The year earlier was compared to the surge right ahead of the consumption tax hike.

Duhhh, go look at last January's sales. The surge happened in February and March, the 2 months before the tax hike.

"The surge happened in February and March,"

Not quite. Household spending in Jan. 2014 was positive, and then negative in Feb. 2014.

http://www.tradingeconomics.com/japan/household-spending

Rising consumer prices can be offset by decreases in other things. So the prices of groceries increase 7%, but the price of oil decreases by 15%, we would end up with a neutral, or possibl negative inflation rate.

In normal times, inflation is caused by consumer demand. If there is a shortage of iPhones, people are willing to pay for more them. Since people want the phones so much as to pay more, then Apple increases production to meet demand. More materials are bought, and more workers hired to make the additional phones. The tightening of the labor market causes wage competition, so wages increase as companies are willing to pay more for them. The end result of this type of inflation is economic growth.

But these are not normal times. The falling population in Japan (and Japan is not unique, of the G20 countries, only one has a birth rate which exceeds replacement levels) results in decreased demand. Fewer consumers means fewer goods sold, fewer goods sold means fewer goods made, which means fewer materials are bought, and fewer workers are employed. Unemployment remains low as there is a shortage of workers, but there is no wage competition, because consumption is decreasing too quickly. The natural result of this situation is deflation, as the market adjusts to decreasing demand.

Unfortunately, large debt holders cannot easily maintain their debts in a deflationary environment. If there was 2% annual inflation, these debts would become 2% lighter each year. But if there is 2% deflation, the weight of the debt increases by 2% per year.

Decreasing consumption means decreased incomes, so the government sees decreasing income and sales taxes. With revenues decreasing, and deflation increasing debts (not to mention the fact that the government continues to spend ever more each year), the only options the government has are to increase taxes, and try to create artificial "cost-push" inflation. The government is devaluing the currency in order to drive up prices, and, and by some perverted form of logic, somehow expects that this type of inflation will decrease the weight of the government's debt. The problem is that the government is creating and buying assets to create this cost-push inflation, which means that any lightening of the debt through devaluation is erased by adding the money created and borrowed to devalue the debt. Once again, this is like drilling holes into the bottom of a sinking ship to let out the water, it won't work.

The economic picture in Japan remains less-than-rosey.

Worse yet, America's recent GDP growth numbers have been revised downwards, from 2.6% to 2.2%, and when looking closely at where last year's increase in GDP came from, it turns out it was not from the private sector, most of the increase in GDP was the result of government spending on the Affordable Care Act, which means that America's growth was primarily the result of the government borrowing and spending even more money.

Our governments and central banks are painting our economies into a corner.

"Our governments and central banks are painting our economies into a corner."

The only institutions in developed countries in modern times that "paint our economies into a corner" are private-sector financial institutions. A simple study of the causes of 2008, 1991 and the 1930s will quickly reveal that fact.