Inflation in Japan goes negative on Go To Travel discounts

Sep 19, 2020 | News On Japan

Sep 19, 2020 (Japan Times) - The key inflation gauge went negative again last month, driven down by government discounts meant to boost consumer spending and help the pandemic-hit travel industry.

Consumer prices excluding fresh food fell 0.4 percent in August from a year earlier, falling back into negative territory again after two flat months, the Ministry of Internal Affairs and Communications reported Friday in a result matching the median private sector forecast. A 32 percent drop in the cost of hotel accommodations accounted for most of the overall drop.

The Bank of Japan has been fighting a long battle to stoke price momentum, but Gov. Haruhiko Kuroda said Thursday he isnâ€™t overly concerned by temporary price impacts from the governmentâ€™s stimulus measures. The BOJ wonâ€™t hesitate to ease further, he said, if factors in the labor market also start to weigh on inflation.

The governmentâ€™s Go To Travel discounts have added downward pressure on prices that were already weak amid the pandemic and soft energy markets. The situation is likely to get even worse next quarter when economists see core consumer price index falling by an average of 0.6 percent after the index loses the upward support of a tax hike a year ago.

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