Demand for goods and services in Japan are plunging. Please consider Japan’s Deflation Deepens as Prices Fall Record 2.4%.

Japan’s consumer prices fell the most in at least 38 years in August, heightening the risk that prolonged deflation may hamper the country’s recovery from its deepest postwar recession.

Prices excluding fresh food slid 2.4 percent from a year earlier, topping July’s 2.2 percent decline, the statistics bureau said today in Tokyo. The drop, the sharpest since the survey began in 1971, matched economists’ estimates.

“We’ll soon start to see that there isn’t enough domestic demand to push up wages,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo. “As households’ spending power falls, there’s concern that this deflation will lead to further deflation — in other words, that we’ll enter into a deflationary spiral.”

Much of the drop in prices reflects last year’s peak in oil costs. Crude reached an unprecedented $147.27 a barrel last July, and has dropped more than 50 percent since then.

The oil effect “will diminish over the next few months, quite quickly,” said Richard Jerram, chief economist at Macquarie Securities Ltd. in Tokyo. Even so, Jerram expects prices will keep falling for at least another three years as the country enters a period of “persistent deflation.”

Economic Madness Over Pork Prices

In what amounts to economic madness, Japan to Buy Domestic Pork to Boost Prices After Demand Drops.

Japan, the world’s largest pork importer, will purchase about 70,000 swine carcasses from local herds to boost prices after an economic slump cut consumption and sent stockpiles of the meat to the highest level in 20 years.

The government will spend 292.9 million yen ($3.3 million) on the purchasing program, the Ministry of Agriculture, Forestry and Fisheries said in a statement today.

Pork wholesale prices plunged 26 percent from a year earlier to 380 yen a kilogram on average this month in Tokyo, according to government data. Consumers are eating less meat as the recession cut wages and boosted unemployment. Japan’s price- support measure may benefit exporters such as the U.S., Canada and Denmark as the domestic premium over imports may widen.

Japan’s pork imports dropped 14 percent from a year earlier to 61,981 tons in July, according to data from the Finance Ministry. Purchases declined as Japanese demand shifted to cheaper food products such as chicken amid deflation, Fujii said in an interview today. In the year ended March 31, Japan imported 815,063 tons of pork, up 8 percent from a year earlier.

Mad Facts

  • The Japanese Government is buying 70,000 swine carcasses even though stockpiles are the highest in 20 years.
  • Japan is the world’s largest pork importer, stockpiling supplies.
  • Japanese consumers are switching to chicken because it is cheaper.
  • Japan’s “remedy” is an attempt to force pork prices higher.

Does this make any sense at any level?

Japan Ponders Currency Intervention

Currency intervention, like pork intervention, like gold manipulation cannot possibly work. Yet Japan never learns.

Please consider Fujii Denies Support for Strong Yen in Reversal of Rhetoric.

Japanese Finance Minister Hirohisa Fujii said the government may act to stabilize the foreign-exchange market and denied that he supported a stronger yen, a day after the currency surged to an eight-month high.

“If the currency market moves abnormally, we may take necessary steps in the national interest,” Fujii said at a news conference in Tokyo today.

Deputy Prime Minister Naoto Kan said today that currency markets should be “as stable as possible” and he’s “carefully” monitoring the effect of yen moves on the economy.

Eiji Hirano, a former Bank of Japan executive director, said Fujii intends to retain the option of selling the yen should it gain excessively.

Japan hasn’t stepped into the foreign-exchange market since the first quarter of 2004, when the central bank at the behest of the Finance Ministry sold a record 14.8 trillion yen ($165 billion) to weaken the currency.

Currency Intervention And Other Conspiracies

Inquiring minds will want to consider Currency Intervention And Other Conspiracies for a flashback look at August 11, 2008.

At the time there was widely held belief in US dollar intervention, Euro intervention, and gold intervention (there is always belief in gold and silver intervention). I disagreed that intervention was the cause of the dollar rally and so did Marc Faber.

Here is a snip from the article about Yen manipulation.

Yen vs. Japan’s Intervention 2003-2004

click on chart for sharper image

If ever there was proof of the absurdity of currency interventions there it is. Ironically the Yen started plunging shortly after Japan stopped trying to force down the value of the Yen.

So now we are supposed to believe the dollar rallied because of a so called “massive” one time 10 billion Euro trade when Japan produced negative results after spending $300 billion over the course of 7 months!?

Here we go again!

Economic Madness Is Repeatedly Endless.

Mike “Mish” Shedlock
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