Record deflation in Japan

Just days before Japan’s general election, new figures showed record deflation there and the politically sensitive jobless rate hitting a record high.

With 5.7 percent of the working population jobless analysts said rising unemployment is likely to keep any economic recovery fragile.

In July, deflation deepened with core consumer prices falling at their fastest on record, down 2.2 percent from the same month a year ago.

Inflation calculations that strip out volatile food and energy costs, marked their biggest annual fall in seven years.

Weak domestic demand is expected to keep deflationary pressure alive. Japanese household spending fell two percent in July from a year earlier.

For the moment the Bank of Japan is reluctant to take more drastic steps to rein in deflation, which it has forecast will go on for at least two more years.

Economists believe the central bank will keep interest rates at almost zero and continue to buy back government bonds.

Copyright © 2009 euronews

tags: Financial Crisis, Japan, Unemployment