Japan’s deflation problem since early 1990s have been ranked lower in priority during the recession following the globally imposed problems such as fall in exports, huge budget deficits caused by attempts to increase domestic demand through government spending, dealing with Debt to GDP ratio of over 180%.
Now deflation is back in an economy, which is trying to recover from recession. People don’t spend as they expect the prices to fall more. With consumption item of GDP low, the burden is on investment and government spending. And without consumption, investment will be low too. Government issued ¥10,800billion ($110billion) bonds last fiscal year and announced a stimulus spending announcement of ¥7,200billion recently.
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