Japan's Inflation Conundrum

Japan's Inflation Conundrum
Could rising prices kick-start the world's second-largest economy?

Talk to almost any Japanese consumer, and you're likely to hear a litany of complaints about skyrocketing food and energy prices. Though such bellyaching might be common enough in other parts of the world, in Japan rising prices are something altogether new after a decade-long struggle with deflation.

So why, then, do some economists think a shift to inflation could boost Japan's economy? At first glance, the idea might seem far-fetched. The Japanese consumer is now paying nearly $1.70 a liter ($6.40 a gallon) for gasoline and has seen prices for staples such as soy sauce and bread go up 10% to 30% since last year. You would think people would be cutting back on spending (I. Rowley, BusinessWeek Japan, 07/10/2008. Read More