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May 27, 2011    

Japan ends 2 years of deflation

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by Kay Murchie

The Statistics Bureau has today revealed Japan has overcome deflation for the first time in 25 months after consumer prices rose by 0.6% last month – in line with forecasts.

A short period of deflation (where prices fall rather than increase) is a serious threat to an economy because it deters consumers and businesses from spending in expectation of falling prices.

Deflation was a problem for Japan during its so-called “Lost Decade” in the 1990s in which the economy struggled with falling prices.

The figures come shortly after it was revealed that the world’s third largest economy was pushed back into recession in the first quarter of the year.

The earthquake and tsunami in March impacted negatively on growth and the economy contracted by 0.9% in the period.

In other news today, it has been revealed Japanese car production dived in April as manufacturers continued to face a shortfall in parts supply.

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