Most alarmingly, weak domestic demand means wholesale price declines might persist. And this could have perverse effects on the market. Expectations for lower prices may in fact spur companies and consumers to delay purchases, thus eroding corporate profits and forcing firms to cut wages.
However, the Bank of Japan is less pessimistic about the trend. In a press conference Bank officials said that in addition to the global crisis the trend is due to structural factors.
Overall prices declined because of a drop in oil prices from a year ago. Lower prices for steel, chemicals, non-ferrous metals and scrap metal also weighed on wholesale prices.
By contrast, in June the corporate goods price index rose by 0.4 per cent.