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Japanese inflation keeps falling Japanese prices continue to fall
(10 minutes later)
There are signs the Japanese economy has not yet escaped from deflation, with consumer prices falling for the seventh straight month.There are signs the Japanese economy has not yet escaped from deflation, with consumer prices falling for the seventh straight month.
Inflation fell 0.1% in August compared with the same month last year, making a rate rise from the Bank of Japan less likely before the end of the year. Consumer prices fell 0.1% in August compared with the same month of 2006, making a rate rise from the Bank of Japan less likely this year.
Industrial production was stronger than expected in August, despite the problems on global stock markets.Industrial production was stronger than expected in August, despite the problems on global stock markets.
Industrial production rose 3.4% compared with July.Industrial production rose 3.4% compared with July.
It was helped by a recovery in car production, which had been slowed by an earthquake in July.It was helped by a recovery in car production, which had been slowed by an earthquake in July.
Exports also grew, despite the market problems for some of Japan's biggest customers such as the USA, but analysts say it is too early to conclude that the slowdown there will not hit Japan.Exports also grew, despite the market problems for some of Japan's biggest customers such as the USA, but analysts say it is too early to conclude that the slowdown there will not hit Japan.
Interest ratesInterest rates
"If there is to be some impact, that will show up in orders in September at earliest," said Yoshimasa Maruyama at BNP Paribas Securities."If there is to be some impact, that will show up in orders in September at earliest," said Yoshimasa Maruyama at BNP Paribas Securities.
"I think automobile makers are the most sensitive and they are holding the key," he added."I think automobile makers are the most sensitive and they are holding the key," he added.
Economy minister Hiroko Ota claimed that the economic recovery is still on track, despite falling inflation. Economy minister Hiroko Ota claimed that the economic recovery is still on track, despite falling prices.
"Although the consumer price index remained in negative territory, there is not much change in price conditions and an exit from deflation is in sight," he said."Although the consumer price index remained in negative territory, there is not much change in price conditions and an exit from deflation is in sight," he said.
The Bank of Japan is keen to raise interest rates from their current level of 0.5% but will struggle to do so while inflation is falling. The Bank of Japan is keen to raise interest rates from their current level of 0.5% but will struggle to do so while prices are falling.