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2ND LD: Japan deflation feared as Dec. wholesale prices down 1.2% on month+(Japan Economic Newswire Via Acquire Media NewsEdge) TOKYO, Jan. 15_(Kyodo) _ (EDS: RECASTING. ADDING INFO, COMMENTS) Japan's economy may fall into a deflation again as the Bank of Japan said Thursday wholesale prices dropped 1.2 percent in December from the previous month on slides in oil and other commodity prices, marking the fourth consecutive monthly fall -- the first in six years. The central bank's corporate goods price index for December stood at 106.6 against the year 2005 base of 100, the BOJ said in a preliminary report. The headline reading was slightly above the average market forecast of a 1.5 percent fall in a Kyodo News survey. On a year-on-year basis, the index grew 1.1 percent for the 58th straight month of rise. But the pace of rise was the slowest in more than four years. Amid weakening demand for raw materials at a time when companies cut their output in the face of a global economic downturn, corporate goods prices have been falling "sharply," a BOJ official said. Yoshikiyo Shimamine, chief economist at Dai-ichi Life Research Institute, pointed to the possibility that a year-on-year change could also "turn negative soon." Prices for petroleum and coal products fell 12.7 percent month-on-month in December. Those for nonferrous metals slid 6.0 percent, while iron and steel prices shed 1.9 percent with chemical products down 1.3 percent, the BOJ said. The fourth straight monthly fall came for the first time since the index continued to decline for five months in a row between June and October 2002. On a yearly basis, the 1.1 percent rise, which compared with the average market projection of a 0.9 percent gain, was the slowest since May 2004 when the index climbed only 0.9 percent. The latest figure followed a 2.8 percent growth in November, 5.0 percent in October, 6.8 percent in September and a recent peak of 7.4 percent in August. The results came as energy and raw material costs continued to slide. While prices for iron and steel products were up 23.5 percent and prices for pulp, paper and related products gained 8.3 percent, such an upward momentum was weakened by prices for nonferrous metal products, down 23.5 percent, and petroleum and coal products, minus 19.1 percent. Import prices were down 22.7 percent in yen terms and lost 8.8 percent in terms of contract currencies. Export prices lost 14.9 percent in terms of the Japanese currency, the biggest fall since August 1999, on the appreciation of the yen against other major currencies. They slid 0.6 percent on the basis of contract currencies. Through 2008, meanwhile, the index came to 108.8, up 4.6 percent from a year earlier, or the biggest increase since 1980 when it expanded 15.0 percent amid the impact of the oil shock since late the 1970s. It grew for the fifth consecutive year, largely affected by earlier rises in energy and raw material costs. Copyright ? 2009 Kyodo News International, Inc. |