(RTTNews) - The fall in Japan’s core consumer price index at a slower pace of 2.3% in September compared to a record 2.4% fall the previous month was mainly due to waning base effect, economists at BNP Paribas said in a note Wednesday.

The firm said the slower pace of decline was a reaction to the surge in petrochemical throughout last summer. Petrochemical price declines narrowed from a 29.1% decrease in August to a 24.5% fall in September. On the other hand, non-petrochemical price deflation was broadening, it said.

The firm meanwhile expects the core CPI to fall 2.2% in October. “While the core CPI has fallen at more than a 2% rate since the middle of this year because of the base effect for petrochemical prices, this effect will gradually be stripped away”, BNP Paribas said. Therefore the decline in the core prices would narrow from November onwards. The firm said when the base effect of petrochemical prices vanish, the core CPI would fall more than 1%, given spreading price declines.

BNP Paribas moreover said prices in the country will not stop falling any time soon, as the supply demand gap remained quite large due to underutilization of resources.

The data for Tokyo metropolitan area showed that price deflation for goods and services excluding energy was broadening. The firm said as the CPI includes only the data that can be continuously monitored, actual price declines are widening more than the CPI shows. This was because large supermarkets were aggressively investing in bargain private brands rather than national brands, and the discount sales of private brands were spreading.

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Posted in Categories: Economy, Japan, Releases.

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