Japan is caught in a deflationary spiral that has left its government scratching its head in search of a solution and its exchange traded funds (ETFs) in the doldrums. The rejuvenated Japanese yen isn’t helping things, either.

The Japanese economy only expanded 0.1% in the second quarter and was overtaken by China as the world’s new number two economy, reports Hiroko Tabuchi for The New York Times. The Japanese yen is also appreciating, diminishing the the returns of Japan’s exports. There is currently little or no talk of currency intervention within the government.

Consumers are staving off expensive purchases, waiting for prices to fall further. The reduced consumption is exacerbating the deflation problem, with companies reducing prices further to outbid their competitors. Additionally, the country is also home to an aging and diminishing population who are more bent on saving than spending. [Currency ETFs: What’s In It for You?]

Japan’s economy minister Satoshi Arai stated that there are no definitive steps being taken for an economic stimulus, reports Takeshi Takeuchi for The Wall Street Journal.

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