Japan economic recovery under way as deflation eases Consumer prices excluding fresh food declined 0.4 percent from a year earlier—the smallest drop since 2009. The unemployment rate unexpectedly fell to 4.9 percent from 5.1 percent—the first decrease since September. The economy will emerge from its slump “soon.”

Source: Bloomberg, January 27, 2011 On an AS-AD graph show the macroeconomic equilibrium in Japan in 2010.

Show why economic recovery is under way and deflation is easing.