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Japan's deflation persists, business spending down, though job situation improves

TOKYO – Japan said Friday that its chronic deflation persisted in January, with consumer prices falling 0.2 per cent from a year earlier, though the employment situation showed a modest improvement.

Prime Minister Shinzo Abe took office in December vowing to end Japan’s long ordeal with deflation, or falling prices, that tend to discourage business investment and weaken growth. So far, there are scant signs of any progress in achieving a new official inflation target of 2 per cent.

Among other mixed signals, the government reported that non-financial corporate investment dropped 8.7 per cent in the final quarter of 2012 from a year earlier, the first such decline in five quarters, as weak exports cast a pall on business sentiment.

The government said unemployment declined to 4.2 per cent in January from 4.3 per cent in December.