Somewhat bright reports on the Japanese economy have been issued by the government and the Bank of Japan. But other data show that the economy is still in difficult straits. Careful attention should be paid especially to the gloomy prospects for employment.
In June, the government upgraded its assessment of the economy for the second consecutive month. Economic and Fiscal Policy Minister Kaoru Yosano said, "It is strongly estimated that the economy clearly hit the bottom in the January-March period." Last week, in a meeting of Bank of Japan branch managers, BOJ Gov. Masaaki Shirakata said, "Japan's economic conditions, after deteriorating significantly, have begun to stop worsening."
But a BOJ report shows that Japan's wholesale prices dropped a record 6.6 percent in June from a year before — the largest drop since the BOJ began releasing comparable data in 1960. Although lower energy prices are a big factor, weakening domestic demand cannot be ruled out. Wholesale prices on a month-on-month basis fell 0.3 percent from May for the 10th straight month of decline — the longest decline since January 2002. These data testify to the effects of deflationary pressure on the recession-hit economy.