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Spectre of deflation returns to haunt Japan

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Spectre of deflation returns to haunt Japan

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While Japan has issued encouraging news on unemployment, which has fallen to 5.1 percent, prices have fallen at their fastest rate since 2001, fuelling deflation.

A strengthening yen is hurting Japanese exports, and the Bank of Japan is forecasting three years of deflation into March 2012. However it says the overall economy is picking up. Despite weak demand in key sectors household spending rose 1.6 percent in October, double the forecasts.