Japan's February CPI down 1.2 percent

March 26, 2010 at 7:15 AM

TOKYO, March 26 (UPI) -- Japan's February CPI fell 1.2 percent from the same month of last year, the government said Friday, worsening deflationary pressures on the economy.

It was the 12th straight month of decline in the Consumer Price Index, the government said, Kyodo news reported.

The numbers come at a time when Japan, the world's second largest economy after the United States, is struggling to recover from its worst post-war recession.

The BBC reported the Japanese economy has been experiencing bouts of deflation since years of stagnation during the 1990s, which are referred to as the "lost decade."

During deflation, consumers put off purchases in anticipation of further price declines, resulting in revenue losses. Businesses are then forced to cut jobs, but the resulting wage losses only adversely affect prices, thus worsening the deflationary spiral.

The BBC report said preliminary figures for March in Tokyo, a barometer of national trends, showed a steeper decline.

"The pace of decline in prices is slowing somewhat, but prices are still falling," said Finance Minister Naoto Kan. "More efforts will be needed to escape deflation."

The BBC report said the government already is burdened with enormous debt, which would prevent it from spending more to counter the problem.

"There is still long way to go before Japan pulls out of deflation," Takeshi Minami at the Norinchukin Research Institute told the BBC.

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