( ´゜д゜｀)英字新聞
Govt, central bank must defang deflation
Although some positive signs about the nation's economy have emerged, deflation's grip on the economy is becoming ever tighter.
The nationwide core consumer price index fell 1.3 percent in January from a year earlier for the 11th consecutive month of decline. The index has dropped to its lowest level since March 1993.
Prices have largely fallen following the decline of high crude oil prices last summer. The rate of drop shrank for four consecutive months recently, but has, worryingly, once again started to expand.
Expectations that deflation will be defeated anytime soon have faded. As it stands, the nation's economy could be plagued by serious deflation for a long time, a situation that has shades of the financial recession of about 10 years ago.
A policy of the administration of Prime Minister Yukio Hatoyama to provide benefits to households will only have a limited effect in the fight against deflation. We think the administration should instead place greater priority on measures that will boost the economy and end deflation.
Prices dropped for all manner of goods, ranging from consumer durable goods, including home electrical appliances, to food and other daily necessities.
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Common goal
When prices continue to drop, company sales shrink and their profits decrease. The ensuing corporate belt-tightening often crimps wages and hamstrings household income. This stokes public reluctance to invest and buy goods. As a result, the prospect of a full-scale economic recovery decreases.
The government and the Bank of Japan have acknowledged that deflation must be overcome. Both want to see price growth "of about 1 percent."
However, they have not been in tune when it comes to taking concerted action to defeat deflation.
The government expects the central bank will implement additional monetary easing steps. Government officials, who attended the Bank of Japan's policy meetings, have urged the central bank to overcome deflation with flexible monetary policies.
Meanwhile, the central bank believes that weak domestic demand has been the primary cause of deflation. The bank wants the government to fight deflation such as by implementing fiscal measures.
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All hands needed on deck
Although the common goal of overcoming deflation is quite evident, the government and the central bank each give the impression that they would prefer to let the other lead the fight. Under such circumstances, even if Hatoyama and Bank of Japan Gov. Masaaki Shirakawa talk tough about beating deflation, their comments might lack conviction to the ears of the public.
The government and the central bank must swiftly deepen discussions on policy coordination and devise effective measures against deflation.
The government should not only continue to stimulate the economy by implementing fiscal measures, but also quickly flesh out growth strategies to strengthen corporate vitality. It also will be essential to secure a stable financial resource to meet social security costs--which will help alleviate people's anxiety about the future--and map out measures that will encourage households to unlock their savings and spend their cash.
However, there is a fear that long-term interest rates could rise if the additional issuance of government bonds continues to gnaw at the state's financial health. The central bank should consider further quantitative monetary easing, such as purchasing more government bonds.
Although some positive signs about the nation's economy have emerged, deflation's grip on the economy is becoming ever tighter.
The nationwide core consumer price index fell 1.3 percent in January from a year earlier for the 11th consecutive month of decline. The index has dropped to its lowest level since March 1993.
Prices have largely fallen following the decline of high crude oil prices last summer. The rate of drop shrank for four consecutive months recently, but has, worryingly, once again started to expand.
Expectations that deflation will be defeated anytime soon have faded. As it stands, the nation's economy could be plagued by serious deflation for a long time, a situation that has shades of the financial recession of about 10 years ago.
A policy of the administration of Prime Minister Yukio Hatoyama to provide benefits to households will only have a limited effect in the fight against deflation. We think the administration should instead place greater priority on measures that will boost the economy and end deflation.
Prices dropped for all manner of goods, ranging from consumer durable goods, including home electrical appliances, to food and other daily necessities.
===
Common goal
When prices continue to drop, company sales shrink and their profits decrease. The ensuing corporate belt-tightening often crimps wages and hamstrings household income. This stokes public reluctance to invest and buy goods. As a result, the prospect of a full-scale economic recovery decreases.
The government and the Bank of Japan have acknowledged that deflation must be overcome. Both want to see price growth "of about 1 percent."
However, they have not been in tune when it comes to taking concerted action to defeat deflation.
The government expects the central bank will implement additional monetary easing steps. Government officials, who attended the Bank of Japan's policy meetings, have urged the central bank to overcome deflation with flexible monetary policies.
Meanwhile, the central bank believes that weak domestic demand has been the primary cause of deflation. The bank wants the government to fight deflation such as by implementing fiscal measures.
===
All hands needed on deck
Although the common goal of overcoming deflation is quite evident, the government and the central bank each give the impression that they would prefer to let the other lead the fight. Under such circumstances, even if Hatoyama and Bank of Japan Gov. Masaaki Shirakawa talk tough about beating deflation, their comments might lack conviction to the ears of the public.
The government and the central bank must swiftly deepen discussions on policy coordination and devise effective measures against deflation.
The government should not only continue to stimulate the economy by implementing fiscal measures, but also quickly flesh out growth strategies to strengthen corporate vitality. It also will be essential to secure a stable financial resource to meet social security costs--which will help alleviate people's anxiety about the future--and map out measures that will encourage households to unlock their savings and spend their cash.
However, there is a fear that long-term interest rates could rise if the additional issuance of government bonds continues to gnaw at the state's financial health. The central bank should consider further quantitative monetary easing, such as purchasing more government bonds.
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