Coronavirus causes Japan to worry about deflation as prices on goods drop
April’s retail costs in Tokyo and the nation’s industrial activity slumped for the first time in years, according to data released on Friday (May 1), promoting fears that the COVID-19 pandemic could once again tip the nation into economic deflation.
These public fears are already pushing the government of the world’s third-biggest economy towards putting forth regulations that would promote consumer spending, despite the fact that Japan’s Parliament had recently approved the budget to fund a record-breaking US$1.1 trillion stimulus aimed at cushioning the economic impact of the coronavirus crisis.
Tokyo’s core consumer prices, one of the primary inflation indicators for the nation, had fell by 0.1% in April year-on-year, according to official data, undercutting predictions of a 0.1% growth and directly following a 0.4% growth in March. The data marked the first year-on-year drop since April 2017.
Although the slump in prices can be primarily attributed to falling prices of crude oil and the subsequent drop in energy prices, it has solidified predictions that the island nation will see a drop customer costs farther down the road as its economy starts to feel heavier economic blows from the global crisis.
A different business review, also released on Friday (May 1) affirmed Japan's April manufacturing output figures shrank at their quickest pace in over 10 years.
Japan had endured almost twenty years of consistently dropping consumer prices, all the way up to 2013, when Prime Minister Shinzo Abe's stimulus regulations brought large portions of the nation out of economic stagnation.
Abe has flaunted bringing about an end to economic deflation as one of the key triumphs of his policies, which included broad financial easing as brought about by his personally selected BOJ Governor.
All things considered, the pandemic has brought about substantial economic damage and fed worries of revival to price drops.
Numerous experts speculate that Japan has already deep in recession as lockdown measures for both individuals and businesses nearly freeze consumerism, while comparable measures throughout the world have disrupted global trade.
Financial specialists anticipate a global downturn in economic growth in Q1 2020 to be worse than the nearly 18 percent drop in the Q1 2009, when the world was experiencing a global financial crisis.
The BOJ had pushed fiscal improvement at its strategy meeting earlier in the week and promised to inject even more cash into the sickly economy.
Another measure that was brought up may call for the BOJ to hold an emergency meeting prior to a planned rate review in June, in order to develop and implement incentivizing policies for banks that would promote lending to SMEs, Kuroda had said on Thursday (Apr 30).
Although many nations throughout the world are poised to re-open for business, Japan is expected to prolong its state of emergency in order to further contain the contagion, according to national broadcasting organization NHK.
Japan has reported in excess of fourteen thousand COVID-19 cases and 455 related fatalities, as indicated by a NHK count.