Japan postpones forecast to inflation as economy decline continues

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Predictions of economists are mixed as to whether Japan will be able to grow out of deflation any time soon, and 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. Consumer prices in Japan fell for the seventh year in a row in the fiscal year ending in March 2005. Although the fall was much less in the most recent year, when the consumer price index (CPI) fell only 0.2 percent, a steep decline in the price of electricity and fixed line telephone services in the wake of deregulation fueled deflation. The CPI had declined 0.8 percent in the previous two years. In addition, the April CPI for Tokyo fell 0.5 percent. All this has meant that the Japanese economy remained in deflation despite the intermittent growth of the past three years and has caused the Bank of Japan to postpone its forecast that the Japanese economy would return to inflation this year, pushing it back until next year.