InsideJapan News Network

Figures showed that prices in Japan have fallen again although the rate of deflation is easing.

The country's statistics bureau revealed that the rate of decline fell to its lowest level in 21 months in January due in part to the rising cost of oil and food.

Overall consumer prices, excluding fresh food, dropped by 0.2 per cent compared to January 2009 - slightly below Bloomberg News predictions of a 0.3 per cent fall.

The Daiwa Institute of Research (DIR) explained that many Japanese companies had taken the step of raising prices to help offset the increase in raw materials and energy bills.

"Price increases caused by costlier commodities will only have a negative effect on the economy, eroding corporate profits and discouraging consumption," Hiroshi Watanabe, a senior economist at DIR in Tokyo, told Bloomberg.

He added: "The Bank of Japan won't consider tightening unless prices resume rising for an appropriate reason, which is the economy’s recovery."

The central bank of Japan recently opted to keep interest rates for overnight borrowing between zero and one per cent.

Written by Susan Ballion.