International BusinessJapan may face deflation through 2011: IMF
The International Monetary Fund has said that Japan would likely wrestle with deflation through 2011 as it struggles to recover from severe recession.
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"Inflation is projected to remain negative until 2011," the IMF added in a report, yesterday.
The IMF sees prices falling 1.1 per cent this year, 0.8 per cent in 2010 and 0.4 per cent in 2011.
The world"s second-largest economy has benefited from authorities" "well-calibrated response" to the worst recession in decades, said the report on a consultation with Japanese authorities that ended on July 6.
But the IMF directors shared authorities will need to ratchet up the battle against recession if downside risks turn out to be real.
A week ago the Washington-based institution raised its outlook for Japan to gross domestic product growth of 1.7 per cent in 2010, after a 0.6 per cent contraction this year.
Concerns have been growing about the prospect of another bout of deflation in Asia"s largest economy.
The IMF said the outlook for the export-dependent economy was "exceptionally uncertain."
"A sustained recovery will likely emerge during the course of 2010 but will hinge critically on improvement in overseas lending conditions and trade," added the report on the so-called Article IV consultation.