Deflation, Strengthening Yen Threatens Japan's Economy

Falling consumer prices and a strengthening yen is threatening Japan's recovery from the recession, says Reuters.


According to Reuters, prices--excluding volatile energy and food prices--matched a record fall from 2001, the last time Japan slid into deflation, as companies slashed prices of electronics and package tours to lure households to spend.


Meanwhile, the dollar's falls to 14-year lows against the yen may deepen Japan's woes, hurting exports and deepening deflation by pushing down import prices, reports Reuters.


"Deflation and yen strengthening could significantly damage Japan's economy, so the government and the Bank of Japan would need to do something," Takeshi Minami, chief economist at Norinchukin Research Institute, told Reuters.


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