Worrying signs in Japan as prices fall
While the rest of the world battles to maintain a positive consumer price index figure, Japan today revealed that consumer prices, excluding fresh food, declined by 0.1% in April. This is compared to 12 months earlier and heralds a return to deflation in a country which was decimated back in the 1980s and 1990s by the fall in the stock market, the collapse of the property market and deflation. So what will happen next?
In a worrying development the governor of the Bank of Japan has this week suggested that prices will continue to fall until March 2010 as the prospect of a severe period of deflation looms large. The sapping of demand in the consumer market, the expected fall in the price of oil and a general lacklustre feel about Japanese economy do not bode well for the immediate future. While Japan has been in this situation before, consumers know only too well that excessive competition in a deflationary period will see today's prices beaten tomorrow as businesses fight for survival.
As we have covered on a number of occasions there are very few consumers who would buy non-essential items today when they know that tomorrow they will be cheaper. This may sound very simple but in effect this is the power of deflation and its ability to change the mindset of consumers and businesses alike.
Share this..
Related stories
Now the insurance market is suffering
As we suggested some time ago it looks as though it is the turn of the insurance sector to suffer from the fall in investment markets around the world. While the Association of British Insurers has intervened to try and calm investor nerves in some ways this has only highlighted the issue further.
Even though there does not appear to be any immediate threat to insurers in the UK th...
UK mortgage security scheme receives EU clearance
A UK government plan to inject significant life back into the mortgage-backed securities market has been cleared by the EU authorities under severe pressure from the UK government. The move will see around £50 billion of mortgage liquidity pumped back into the market in exchange for assets which will be used as collateral to increase liquidity.
The mortgage liquidity market and mor...
UK dividends down 15% on average in 2009
In a reflection of the state of the UK economy and the UK stock market it has been revealed that the average dividend paid by companies in the UK fell by 15% in 2009. This equates to £57 billion which is around £10 billion less than the corresponding figure in 2008 and an obvious disappointment for investors in the UK. While the figure of 15% is enough to grab the headlines, when you consider...
Read MoreLook after the pennies and the pounds will look after themselves
There are many sayings in the financial industry and one which is sometimes ridiculed is "look after the pennies and the pounds will look after themselves". However, if you take a step back and review this particular saying you may well begin to understand exactly where it comes from! While the vast majority of us will at some time look to save money on our monthly budgets and household expendi...
Read MoreAll eyes on the budget this week
There are many areas of the UK budget announcement, expected on 22 April, which will attract the attention of investors and observers around the world. First we have the issue of the ongoing budget deficit, which is expected to increase to a record £175 billion, the largest post-war deficit. Then we have the issue of personal taxation, with an acceptance across the board that UK taxpayers will be...
Read More