The government on Friday stopped short of declaring the death of deflation in its September economic report, but dropped the dreaded word for the first time since April 2001.

For Prime Minister Junichiro Koizumi, the report represents the last assessment of his administration’s economic achievements before he steps down at the end of the month.

One of Koizumi’s economic policy goals was to defeat deflation, which has haunted the country for much of the past decade. Although he originally intended to beat it by March 2007, he still wanted to make a quick optimistic announcement on it before leaving office.

But the government had to compromise on the wording of the September report because international factors still pose a threat to domestic price trends.

The next prime minister, widely expected to be Chief Cabinet Secretary Shinzo Abe, is expected to declare deflation dead as early as next month after being appointed Sept. 26.

The report was submitted to the Cabinet on Friday.

“The report does not determine that deflation has ended,” Financial Services Minister Kaoru Yosano told a news conference. “The assessment of price trends in this report shows that we are not in a situation where price would decline continuously.”

Yosano said that although domestic factors do not present a risk to price trends, there still might be factors in overseas economies that could affect them.

The August report vaguely cited the possibility that factors in domestic and foreign economies could trigger unstable price trends, a Cabinet Office official said.

The September economic report shows that four economic indexes have dropped — private consumption, housing construction, imports and exports. Nevertheless, it maintains that the “economy is recovering” — a term it has been using since February.

The report says the government and the Bank of Japan will do their utmost to ensure price stability.

The report also says that private consumption has been “decelerating recently,” a change from last month’s expression “increasing moderately.” The downward revision was the first in 19 months, dating back to February 2005.

While exports and imports were “increasing moderately” in the August report, the September report says they are now “flat.”

The figure for housing construction is also “generally flat,” another negative change from last month, when it was described as “increasing.”

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