(February 8 – 10:00 ET) – “All eyes will be on the Bank of Japan’s policy board meeting on Friday following mounting pressure from politicians, in the wake of falling prices, for the bank to ease monetary policy and save the economy from a fresh crisis,” writes Michiyo Nakamoto in today’s Financial Times.

“The BoJ and the finance ministry have exchanged salvoes, with the usually sedate finance minister, Kiichi Miyazawa, pointedly challenging the position of Masaru Hayami, the BoJ governor, that Japan’s falling prices were “good” because they reflected the positive impact of restructuring and productivity increases.”

“But while Japanese consumers are having a ball as fierce competition pushes down the cost of everything from lunch to personal computers, the fall in prices has triggered economic warnings and a fierce public debate on what needs to be done.”

“The bank’s optimistic view is that changes on the supply side brought about by restructuring, globalisation and deregulation have allowed producers to innovate and bring down prices.”

“An increase in global procurement is lowering the costs producers need to pass on to consumers. Fast Retailing, for example, has expanded rapidly throughout the country with its Uniqlo brand of casual clothing, which it is able to sell at cut-throat prices by sourcing all its product from China.”

“Such completely new business models, reflecting higher productivity, are a key factor behind falling prices, says Takehiro Sato, a senior economist at Morgan Stanley Dean Witter in Tokyo. Increased competition is also playing a leading role in sectors such as telecommunications, where regulatory changes have spurred deep rate cuts.”

“Deregulation in the retail sector has triggered a surge in the opening of large stores, which in turn has fuelled price competition.”