T or F? A drop in cell phone rates is good news.
Posted by Matt Dioguardi on October 4th, 2007
T or F: cheap cell phone rate in Japan is good news.
False, at least apparently not in Japan.
Ever wonder just how big cell phone consumption is in Japan?
It is so big that if major service providers cut prices substantially it will actually cause the price index to significantly move downward.
This means deflation. Is that desirable? Well, people didn’t seem to like it during the great depression, but in some ways it is better than inflation.
I mean, cell phone prices are too high in Japan, aren’t they?
A price war aimed at Japan’s 100m mobile phone users could have a significant impact on the core consumer price index, potentially prolonging the country’s brush with deflation, economists warned on Wednesday … economists said that hefty cuts in mobile service fees could knock as much as 0.6 percentage points off the headline CPI … the Ministry of International Affairs and Communications, which compiles the CPI, must decide how to account for an expected cut in mobile phone charges of up to 30 per cent by KDDI, Japan’s second-biggest mobile phone provider. NTT DoCoMo, Japan’s leading mobile phone company, is expected to follow suit … John Richards, senior strategist at Royal Bank of Scotland in Tokyo, said that, as a worst-case scenario, a 30 per cent cut in fees could lower the CPI index by 0.6 percentage points. Given that the CPI was falling at a rate of 0.1 per cent, the impact would be “huge”, he said.
And I was so excited about cheaper cell phone usuage. Talk about raining on someone’s parade.