Thursday April 24, 2008

Japan wholesale inflation hits 27-year high of 3.9% in Mar 2008

channelnewsasia.com :

Japan's wholesale inflation rate hit a fresh 27-year high of 3.9% in March as companies struggled to cope with soaring raw material and energy costs. Producer price inflation accelerated from a revised annual rate of 3.6% in February, the Bank of Japan said. It was the strongest rise in corporate goods prices since February 1981. Japanese companies, particularly smaller firms, are being squeezed by rising prices of commodities and energy. Sluggish consumer spending and fierce global competition is making it hard for them to pass on the higher costs to customers.

- Japan is a fascinating case, being a real-life example of a country undergoing a trend reversal from deflation to inflation. One wonders how their people are coping. How does 2 decades of deflationary expectations turn into inflationary expectations? In a deflationary environment, you simply keep cash around, and your purchasing power grows. In an inflationary environment, it is the opposite - you don't want to keep cash around. You want to invest it someplace or to spend it on something before everything goes up in price.

A telling tale was during the German Weimar hyperinflation in the 1920's when a gentleman ordered a cup of coffee, finished it, and when he turned around to order another cup, the price had gone up. Inflation has been accelerating recently. We may be headed in this direction.

See also :

1. Japan shows first inflation signs as core CPI rises 0.1%
2. Japan inflation at fastest pace in more than 9 years
3. Japan core inflation rate hits 10-year high of 1.0% in Feb 2008

(2008-04-24 12:52:32 SGT) [Biz] Permalink

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