After a protracted period of deflation from 1999 to 2005, Japan appears headed for falling prices yet again. Japan’s core CPI (which excludes fresh food prices, but not energy prices) rose 1.9% yoy in October - a drop from September's 2.3% yoy rise. The consensus forecast is now that Japan will dip back into deflation (as measured yoy) in mid-2009, with many seeing a return to positive territory in fiscal year 2010/11. Nevertheless, there are reasons to believe deflation this time around might not be as temporary a phenomenon as some now believe.
Many analysts, such as Azusa Kato[...]