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The government signaled Wednesday the economy is definitely moving forward, dropping the word “deflation” from its monthly economic report for the first time in five years.

The July report, released by the Cabinet Office, continues its bullish assessment of the overall economy for a fifth straight month, saying, “The economy is recovering.”

Although the year-on-year change in the nationwide core consumer price index, excluding perishables, has been positive since November, the report warns that there’s been hardly any change in the CPI when energy costs and other special factors are excluded.

“We need to closely monitor the price trends now,” the July report says. Last month, the Cabinet Office’s economic report said the economy was “still in a deflationary phase,” retaining the wording it has been using to characterize the situation each month since April 2001.

A Cabinet Office official who briefed reporters on the latest report said the government does not view current price trends as deflation any more, because there’s been a pickup in the year-on-year change in the CPI category excluding energy costs and other special factors.

This type of CPI rose 0.2 percent in April and May on a year-on-year basis, the Cabinet Office said.

“You can say the modification of the report was made in the direction of normalization (of the economy),” the official said on the apparent contradiction. He said the government must ensure the deflation doesn’t return if it wants to formally declare it dead.

The government will continue to monitor various indexes on price trends, including the CPI and the gross domestic product deflator, the official said, adding that not all indexes will necessarily show positive readings to signal the complete end of deflation.

The January-March GDP deflator fell 1.2 percent from a quarter ago, falling for the 32nd straight quarter.

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