What's going on?

Data released on Tuesday showed Japan�s core measure of inflation � consumer prices excluding fresh food � hit 2.8% in August.

What does this mean?

Anyone who�s been keeping up with Western rate hikes is probably looking at Japan a little enviously right now: while the Federal Reserve (Fed), Bank of England, and other major central banks have been upping interest rates to stave off inflation, the Bank of Japan (BoJ) hasn�t yet budged. That�s because the current inflation comes after a three-decade-long battle against periods of deflation � falling prices. If anything, the BoJ chief is probably half-glad he might finally be winning its battle against ever-slipping prices.

Why should I care?

The bigger picture: Deflation’s no picnic.
When Japan�s almighty stock market and property bubble popped in the early 90s, it set the stage for spells of deflation that have plagued the country ever since. See, when prices are falling, consumers tend to sit tight with what they�ve got and delay buying anything in hopes that prices dip further. But this dampens spending and pushes prices lower in turn, setting in motion a declining spiral that ultimately damages economies.

For markets: The winners and losers of a lower yen.
With the Fed jacking up interest rates and the BoJ holding fast, the yen�s slid to a multi-decade low against the dollar. That�s good news for Japanese companies: it means that their products become cheaper for foreign buyers and their overseas earnings are converted into yen at a generous exchange rate. That might be why the Nikkei 225 � a benchmark of Japanese equities � has held pretty steady even as US and European indexes have dropped. But it�s bad news considering that the country imports much of its oil and gas: a weakened yen�s only going to make Japan’s energy more expensive.