Consumer prices fall in Germany and Japan

Angela Merkel will be staying on as chancellor of Germany after winning the elections over the weekend but inflation in the country is not making a quick return. Bloomberg reports the latest German inflation figures released on Monday.

German consumer prices fell at a sharper annual pace in September after energy costs declined.

Prices, calculated using a harmonized European Union method, dropped 0.4 percent from a year earlier after easing 0.1 percent in August, the Federal Statistics Office in Wiesbaden said today. From the previous month, prices also fell 0.4 percent. Economists predicted a 0.2 percent annual decline, the median of 16 forecasts in a Bloomberg News survey showed.

Falling consumer prices is more commonly associated with Japan, and that is not likely to change soon. From AFP/CNA today:

Japan saw a fourth straight month of record deflation in August as weak domestic demand hindered an economic recovery from the worst recession in decades, data showed on Tuesday...

Japan's core consumer prices dropped 2.4 per cent in August from a year earlier, the government said.

Core prices, which exclude those of volatile fresh food, fell for a sixth straight month, after a 2.2 per cent decline in July. Compared with the previous month, however, prices were flat in August...

Core consumer prices in Tokyo, a leading indicator of the nationwide trend, fell by 2.1 per cent in September from a year earlier, after a drop of 1.9 per cent in August, the government said.

Deflationary pressure is making it difficult for the Japanese government to ignore recent yen strength. From AFP/CNA:

The yen gave back some of its recent strong gains in Asian trade on Tuesday after Tokyo fired a warning shot to traders over the currency's surge.

The dollar gained to 89.93 yen in Tokyo morning trade from 89.58 in New York late Monday, when it had earlier sunk to an eight-month low of 88.25.

The greenback rebounded after Japan's Finance Minister Hirohisa Fujii said the yen's recent rise was a bit too rapid and Tokyo did not rule out stepping into the market to sell the currency "in an abnormal situation".