Japanese Deflation Unexpectedly Slips to Worst in 7 Years

Japan’s Consumer Price Index declined 1.1%, worse than the expected 1.0% contraction in the general cost of goods consumed by the public in May. Deflationary pressures continue to plague the Asian country for a fourth consecutive month as the country continues to slip deeper into recession. This brings the official deflation rate to the the worst it has been since early-2002. The move comes after domestic investment plummeted in April. Machine Orders alone tanked -5.4% when expectations had forecast the figure to have only declined by 0.6%. Such action added to -1.3% contraction seen in the month prior. Furthermore, a lack of consumption also weighed on the deflationary environment felt in Japan. Department Store Sales in the 12 months through May worsened from that of the month prior, -14.0% vs -11.9%, easing demand-side pressure on the cost of goods.