[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Friday, 28 September 2007, 06:17 GMT 07:17 UK
Japanese prices continue to fall
Workers at Riken Corp's plant in Kashiwazaki
Car part production bounced back in August after July's earthquake
There are signs the Japanese economy has not yet escaped from deflation, with consumer prices falling for the seventh straight month.

Consumer prices fell 0.1% in August compared with the same month of 2006, making a rate rise from the Bank of Japan less likely this year.

Industrial production was stronger than expected in August, despite the problems on global stock markets.

Industrial production rose 3.4% compared with July.

It was helped by a recovery in car production, which had been slowed by an earthquake in July.

Exports also grew, despite the market problems for some of Japan's biggest customers such as the USA, but analysts say it is too early to conclude that the slowdown there will not hit Japan.

Interest rates

"If there is to be some impact, that will show up in orders in September at earliest," said Yoshimasa Maruyama at BNP Paribas Securities.

"I think automobile makers are the most sensitive and they are holding the key," he added.

Economy minister Hiroko Ota claimed that the economic recovery is still on track, despite falling prices.

"Although the consumer price index remained in negative territory, there is not much change in price conditions and an exit from deflation is in sight," he said.

The Bank of Japan is keen to raise interest rates from their current level of 0.5% but will struggle to do so while prices are falling.

SEE ALSO
Japan sees jump in trade surplus
26 Sep 07 |  Business
Bank of Japan keeps rates on hold
19 Sep 07 |  Business
Nikkei plunges on economy fears
10 Sep 07 |  Business
Japanese prices continue to fall
31 Aug 07 |  Business
China tops US over Japanese trade
25 Apr 07 |  Business

RELATED INTERNET LINKS
The BBC is not responsible for the content of external internet sites



FEATURES, VIEWS, ANALYSIS
Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit

PRODUCTS & SERVICES

Americas Africa Europe Middle East South Asia Asia Pacific