April 14, 2009

Wholesale prices falls sharply in Japan

Wholesale prices in Japan dropped 2.2 percent in March, the steepest drop since May 2002, the Bank of Japan said.

The decline, attributed to a sharp drop in demand in a faltering economy, has triggered new fears of deflation in Japan, Kyodo News reported Tuesday.

Depressed final demand (contributed) to price declines, a bank official said.

Steel and iron prices have risen 10.6 percent on an annual basis, but have recently fallen, dropping 1.8 percent in March following a 1.5 percent drop in February.

Coal and petroleum prices have led the wholesale price decline, falling 34.6 percent from a year ago.

Deflationary forces are expected to strengthen gradually hereafter, and it appears that the wholesale price index is heading toward a year-on-year drop of as large as 6 percent, said chief economist Kyohei Morita at Barclays Capital Japan Ltd.

Economists fear deflation, as consumers hesitate to spend, assuming prices will continue to fall.