The government on Friday downgraded its overall economic evaluation for the second consecutive month, saying the nation's recovery appears to be stalling on weak production stemming from the U.S. economic slowdown.
In its latest monthly report on the economy, the Cabinet Office also said Japan is in a state of mild deflation due to continued falls in consumer and wholesale prices.
It is the first time since the end of World War II that the government has officially acknowledged the economy is in the grip of deflation.