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Friday, October 25, 2002


Japan seems to be on track to enter its fourth consecutive year of deflation - something not seen in any post-war industrialised country - as the country's core consumer price index dropped for the 36th consecutive month in September. The core nationwide CPI fell 0.9 per cent in September, year-on-year, according to government sources. In October, the Tokyo CPI fell 0.8 per cent from the same month the previous year, its 38th consecutive monthly decline.

Heizo Takenaka, the country's embattled economics minister, said on Friday that further debate was needed regarding the Bank of Japan's possible adoption of an inflation target.

"The (Bank of Japan) has said it will keep up its efforts until prices stop falling, and you can call that loosely an inflation targeting. In any event, there are various opinions among experts and we need to further debate this issue." Mr Takenaka - who was this week forced to postpone the announcement of his plan to accelerate the disposal of bad loans after objections from members of the ruling party - has stressed it would be difficult to pursue aggressive moves to clear up bad debts in the banking sector, conservatively estimated at Y43,000bn ($347bn), without equally strong efforts to tackle deflation. Consistently falling prices whittle away at revenue and undermining companies' ability to repay loans.
Source: Financial Times

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