Japan's Annual Inflation Shrank Most in Over Three Decades in June

Japan’s[B] Consumer Price Index[/B] printed squarely in line with expectations in June, showing that annual inflation shrank at an annual pace of -1.8%, the most in at least 33 years. The Bank of Japan has reinforced expectations of negative price growth, noting that the pace of consumer price growth is likely to turn negative, reflecting the declines in the prices of petroleum products, stabilization of food prices, and overall economic weakness. Indeed, utilities and fresh food prices led declines, slipping -5.9% and -4.7% from the previous year. The operative question going forward is whether the BOJ’s aggressive monetary easing measures will make CPI’s dip into negative territory a temporary affair, or if deflation once again becomes entrenched in the world’s second-largest economy. This would substantially delay any hopes for a recovery in the near term, keeping a lid on economic activity as consumers and businesses are encouraged to wait for the best possible bargain and perpetually delay spending and investment.