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Persistent deflation means that cash has more buying power over time.
The decision underscores concerns that a strong yen and persistent deflation threaten Japan's economic recovery.
But he said persistent deflation and market turmoil posed risks for Japan's growth prospects.
But broad and persistent deflation is not a healthy thing for a modern economy.
Persistent deflation tends to encourage households to hoard their cash, as they wait for prices to fall further.
For years the Bank of Japan had set interest rates at zero in an attempt to deal with persistent deflation.
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Japan has had poor demographics and a sluggish economy for 20 years and has suffered from persistent mild deflation.
Panasonic (JP 6752) said the result reflected the impact of the stronger yen, collapsing demand and persistent price-deflation in electronics goods.
For starters, zero inflation and persistent periods of deflation – when the target is 0% and inflation is below target – may lead to debt deflation.
It did so mainly to combat a particularly persistent case of deflation, a broad-based decline in consumer prices, and to revive economic growth.
Bolder economic policy could have addressed the persistent bouts of deflation in post-bubble Japan, write Gene Park, Saori N. Katada, Giacomo Chiozza, and Yoshiko Kojo in Taming Japan's Deflation.
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