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Japan sees new phase in long struggle against deflation

Indicators show improvement, but pay raises needed to prevent backslide

Prime Minister Shinzo Abe, far left, has fought to keep Japan from returning to deflation.

TOKYO -- Japan has entered a new phase in defeating deflation, the Cabinet Office said Thursday, but weak inflation points to the continued need to stoke wage growth  -- a challenge around which Prime Minster Shinzo Abe is trying to rally cash-rich companies.

All four of the indicators the Abe government uses to measure progress away from the "D-word" read positive for the July-September quarter, the Cabinet Office reported at a meeting of the the Council on Economic and Fiscal Policy. It marked the first such alignment in 25 years.

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