How Companies View the Prolonged Deflation　-- The Nissay Business Conditions Survey　(February 2002)

The consumer price index has declined for three straight years since 1999， and shows no sign of abating in 2002 as deflation continues to plague the economy. The impact on companies has been profound. While benefiting from lower costs for parts and materials， companies are also struggling with weak sales prices and rising labor and real interest costs.

The latest Nissay Business Conditions Survey， conducted jointly by Nippon Life Insurance Co. and NLI Research Institute in January and February 2002 (with 3，361 companies responding nationwide)， examines how companies view the deflationary economy and its impact on business.

According to the results， over 80% of companies report declining sales prices， and believe that deflation has had a negative effect on business. Looking ahead， a pessimistic mood prevails that deflation will linger， including 37% who predict deflation to continue for at least three more years. As to causes of declining sales prices， over 50% cite domestic competition， while 30% cite weak demand. Anti-deflation measures being taken include reducing cost of materials， adding more value to products and services， and cutting labor cost.