JAPAN: Japan's Prices, Wages Continue To Fall

01.28.10, 07:40 PM EST 

By TOMOKO A. HOSAKA, Associate Press

TOKYO -- Japanese prices and wages continued to fall in December as deflation deepened its grip on the world's second biggest economy. Core consumer prices fell 1.3 percent from a year earlier, the government said Friday.

The key consumer price index, which excludes volatile fresh food prices, has now fallen for 10 straight months. The reading matches Kyodo's market forecast. Core CPI for the Tokyo area, seen as a barometer of price trends nationwide, retreated 2 percent in January.

For the 2009 calendar year, core CPI retreated 1.3 percent, according to the Ministry of Internal Affairs and Communications.

Lower prices may seem like a good thing, but deflation plagued Japan during its "Lost Decade" in the 1990s. It can hamper economic growth by depressing company profits, sparking wage cuts and causing consumers to postpone purchases. It also can increase debt burdens.

Indeed, paychecks are dwindling. Average monthly household income fell 4.8 percent in December from a year earlier, the ministry said in a separate report.

Workers must also contend with a still-lackluster labor market. The country's unemployment rate eased to 5.1 percent in December, better than 5.2 percent in November but still high by Japanese standards.

The average ratio of job offers to job seekers stood at 0.46, a tad higher than 0.45 a month earlier. The figure means there were 46 offers for every 100 job seekers.

Still, the economy was not without signs of hope.

Household spending posted a solid rise in December, up 2.1 percent from a year earlier. The figure represents a key indicator of private consumption, which accounts for about 60 percent of Japan's economy.

Industrial output climbed 2.2 percent in December from the previous month, just missing Kyodo News agency's forecast for 2.3 percent growth in its survey of economists. The trade ministry expects factory production to rise 1.3 percent in January and 0.3 percent in February.

Earlier this week, the government said that Japan's exports expanded for the first time in 15 months in December, helped by robust Asian demand.

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