Deflation refers to fall of prices. It may seem like a good thing, but in reality no economy wants deflation. Deflation usually accompanies economic slowdowns, lower productivity and loss of jobs. Inflation decreases the value of money, deflation increases its value. This incentivises people to save money now, to buy later when things become cheaper. And this economic behaviour leads to further slowing of growth. During deflation, value of money increases and goods become cheaper. However, your earnings could reduce due to the economic slowdown.

During the Great Depression in the 1930s, deflation was in double digits. In recent times, Japan has been struggling with deflation for two decades.

A positive impact of deflation could be increased export competitiveness, if most other economies are experiencing inflation.