Japan marked three full years of consumer price deflation today as a cycle of falling prices, weakened spending power and rising debt continued to strangle the economy.
The nation's core consumer price index fell 0.9 per cent in September from a year earlier, government data showed, the 36th straight month of declines that span three prime ministers and go back to when the Internet bubble was still bulging.
Tough bank reforms backed by Prime Minister Mr Junichiro Koizumi are aimed at lifting the burden of debt that deflation has been making progressively heavier.
Japan's latest attack on deflation looks set to include hefty tax cuts next year, and the pressure is rising on the central bank to play its part when it meets to decide policy next week. For the time being, though, there is plenty of evidence that deflation is getting worse.
By some measures, Japan has been suffering from deflation for much longer than three years. The GDP deflator has fallen for seven of the last eight years and stock and asset prices are a fraction of their value before the bubble economy burst 12 years ago.
Just as Japan shows signs of making a serious assault on deflation, it is beginning to become a serious worry throughout the global economy, replacing the traditional bogeyman of inflation.
US inflation is at its lowest in around 40 years, and some economists see Germany at risk of deflation as excess capacity across the global economy takes its toll.