Japan consumer prices stagnant as deflation hovers

Japan’s core consumer prices were seen stagnant in July. This dampened hopes for a modest increase as the coronavirus crisis ravaged household demand and heightened the possibility of the economy plunging into deflation again.

Japan’s core consumer price index maintained its level in July from a year earlier, data from the Ministry of Internal Affairs and Communications showed on Friday. The reading placed below the 0.1% increase predicted by markets, following a mired reading in June.

Analysts believe that the recovery seen after last quarter’s contraction will drag prices as consumer demand weakened on virus upsurge. This will also affect profits, employment, and business investments.

The possibility of deflation is expected to pressure the Bank of Japan, urging it to implement larger monetary stimulus and maintain ultra-low interest rates to aid virus-related government fiscal spending.