Deflation Tightens Grip on Japanese Economy

For the 17th month in a row, Japan’s core consumer price index fell in July, contracting 1.1 percent from the same time one year ago. Compounding Japan’s problems is the fact that the yen is at 15-year high against the dollar and as a country that depends heavily on exports with the majority of sales destined for the US, the result is Japan’s exports are now more costly for retail consumers. Naturally, this has a negative impact on sales and Japanese manufacturers have been forced to cut back on production and layoff workers.

“Given the yen’s gains, exports will slump temporarily and slow Japan’s economic recovery. Japan will thus remain in deflation for another two to three years,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

Source: BBC News

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