Over the last 12 months Japan has been struggling with deflation. The prices of consumer goods fell by 1.2% in February with is not that bad, it has been worse. But the predictions for march for Tokyo (which is an indicator for the whole country) are even worse, they show an steeper decline. This deflation causes a lot of problems while people are not willing to buy things today because it might cost less tomorrow. Which leads to a vicious circle of failing company profits.
Now the government is pushing the Bank of Japan to make sure that the prises will start rising. Because this summer there are elections. But they have said that more efforts will be needed, that is why the parliament has passed a record budget of $ 1 trillion. Most of this amount of money is financed by borrowing.
For my opinion i think it is kind of crazy that a country in such problem can stil be the third largest economy behind the US and China. But according to me this is not a problem since the crises started last year. Because I have always heard when you put your money on a Japanese account every year you are losing money instead of making money.
http://news.bbc.uk/2/hi/business/8588399.stm
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I do not think it is crazy that a country in such problem is the third largest economy in the world cause problems and how big the economy is are not linked.
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