August became the fourth successive month of record falls for Japan, as the nation's core consumer prices dropped 2.4% year-on-year during the month.

As per the official figures, core prices, which leave out those of volatile fresh food, sank for the sixth month in a row.

It was because of lower petrol and other energy costs as well as weak domestic demand that the record fall came to scene for the month.

A very long period of deflation in the 1990s, commonly referred to as "the lost decade", was experienced by Japan, the world's second largest economy.

"Lower prices may appear to be a good thing, but deflation can hamper growth by depressing company profits and causing consumers to postpone purchases, leading to production and wage cuts. It can also increase debt burdens," said the official data.

It is in spite of indications of improvement in the Japanese economy that deflation has appeared. The Japanese economy had regained positive growth in the second quarter of 2009, exiting a severe year-long recession.

Meanwhile, confidence was expressed by the central bank that deflation won't take hold again due to low interest rates and the stimulus packages it has already implemented.

But, on the other hand, analysts are not very sure. Many have predicted further falls in prices even when the impact of last summer's spike in the oil price might reduce towards the end of the year.

Susumu Kato, chief economist at Calyon Securities said: "Reflecting stagnant retail sales, falls in prices are spreading more broadly than we had expected. There's a chance that deflation might continue longer than expected."

Apart from this, only a few economists forecast that plunges in prices will increase sharply. But weak domestic demand is likely to keep up the deflationary pressure.