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Deflation fear in Japan as prices fall
29.09.09
Japanese prices fell at their fastest rate in August, prompting fears that the country's fragile economic recovery could be put at risk because of deflation.
The country's key consumer price index fell by 2.4% year-on-year last month, which is the biggest fall since official measurements began in 1971.
This is the six month running that the world's second-largest economy has seen prices fall.
Analysts said that while falling prices appeared to be a good thing they hampered recovery as consumers put off purchases and feared that their wages could fall.
The economic problems of Japan pose a huge dilemma for new prime minister Yukio Hatoyama.
His finance minister, Hirohisa Fujii, has been widely seen as an advocate of a strong yen policy, believing that the benefits far outweighed the problems the powerful currency posed for Japan's exports.
However, today he appeared to soften that stance, saying Tokyo would not necessarily leave excessive rises in the yen unchecked. The yen fell.
