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2009年8月29日 (土)

雇用と物価 デフレに至る悪循環を防げ

The Yomiuri Shimbun(Aug. 29, 2009)
Deflationary pressures must be nipped in bud
雇用と物価 デフレに至る悪循環を防げ(8月29日付・読売社説)

Utmost caution must be exercised to prevent falling prices and the worsening employment situation from allowing deflation to take a vicelike grip on the nation's economy.

The nation's key consumer price index in July fell 2.2 percent from a year earlier, marking the first fall in the 2 percent range in the postwar period.

Meanwhile, the unemployment rate in July climbed to a postwar high of 5.7 percent, up 0.3 percentage point from the previous month.

The worsening employment situation is eroding workers' incomes. Tightening the purse strings at home leads to sluggish sales of products and, in turn, to falling prices. As companies struggle with falling sales, they resort to restructuring and other measures to cut costs, exacerbating the grim employment situation. The latest government figures on prices and employment show that a vicious cycle of deflationary pressures is becoming increasingly real.

Whichever party takes power after Sunday's House of Representatives election, the new administration must do everything it can to arrest these deflationary pressures and boost the economy.

The sharp price falls are due mainly to the drop in oil prices that soared last year. Gasoline prices fell as much as 30 percent from last year, lowering overall prices about 1 percent.

But prices, excluding those of energy-related products, fell 0.9 percent. The rate of fall was about the same as that in fiscal 2001 during a serious deflationary period.


Domestic demand weak

The current deflationary trend should not be waved off as a temporary phenomenon caused by the correction in oil prices after they skyrocketed last year. Rather, weak domestic demand should be considered the major cause of falling prices.

The nation's real gross domestic product for the April-June period returned to positive growth for the first time in five quarters. However, the improvement was mainly attributed to a recovery in exports and policy initiatives under the government's stimulus package that, for example, increased sales of energy-saving home appliances. Worryingly, overall domestic demand remains weak.

Boosting consumption is critical for a full economic recovery. However, sales at department stores and supermarkets have been lethargic for a prolonged period, and sales at convenience stores, which had been brisk, registered a record plunge in July.

Consumers are cutting back spending on foods and other daily necessities. Both the number of shoppers and the amount each shopper spent at convenience stores decreased last month.


BOJ has role to play

Fierce price wars might be good news for consumers, but excessive discounting would add to a deflationary spiral, in which the economy heads south while prices fall.

For the time being, we think it is necessary to bolster domestic demand through economic pump-priming and employment support measures.

The Democratic Party of Japan has indicated it will overhaul the supplementary budget compiled for boosting the economy if it takes power. We agree that it is important to eliminate wasteful spending, but austerity measures such as drastic cuts in spending on public works projects should be avoided.

The Bank of Japan's monetary policy has a crucial role to play. Although the central bank has kept its key interest rate near zero, real interest rates will rise if prices fall. This would sap the impact of the bank's low interest rate policy.

If the deflationary trend gets stronger, the central bank should consider taking additional measures, such as increased purchases of long-term government bonds and the introduction of a quantitative easing policy setting a target for the outstanding balance of current account deposits held by private financial institutions at the central bank.

(From The Yomiuri Shimbun, Aug. 29, 2009)
(2009年8月29日01時03分  読売新聞)


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