For the first time in eight years, Japan's consumer prices (excluding those of perishable food) are forecast to rise on an annual basis, albeit only slightly. A 0.1 percent increase in consumer prices is expected for the fiscal year starting April 1, 2005, according to an economic and price outlook released in late October by the Bank of Japan.
Since a number of BOJ Policy Board members are predicting a continued price decline, the report stops short of saying deflation will disappear next fiscal year. Nevertheless, the message is promising: At long last, the protracted slump in prices appears to be nearing an end.
The on-and-off recessions that followed the collapse of the asset-price bubble in 1990 spread a mood of pessimism nationwide over the possibility that a combination of negative economic growth, stock market crashes and falling prices would trigger a deflationary spiral and send the economy into a tailspin. Some politicians and economists "talked up" that worst-case scenario, thus unnecessarily fanning a sense of an impending crisis among the public.