Consumer deflation continues in Japan

Consumer deflation continues in Japan

Consumer prices in Japan fell for the seventh year in a row in the fiscal year ending in March 2005. This meant that the Japanese economy remained in deflation despite three years of intermittent growth.

The consumer price index (CPI) fell only 0.2 percent in the most recent year, much less than the 0.8 percent fall of the previous two years, but a steep decline in the price of electricity and fixed line telephone services in the wake of deregulation fueled deflation.

In addition, the April CPI for Tokyo fell 0.5 percent. All of this has caused the Bank of Japan to postpone its forecast for a return to inflation from this year to next year.

The Japanese finance minister was quoted as saying that because the prices of some products have started going up and corporate profits are good, it is hard to know why deflation was continuing.

He vowed to continue efforts to rise out of it. Predictions of economists are mixed as to whether Japan will be able to grow out of deflation any time soon.


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