There was a time in the 1980s that inflation was Public Enemy Number One, and dire predictions were made that if left unchecked, runaway prices would ultimately threaten the foundations of the global economic order. How times have changed. Far from being viewed today as the Great Satan in the economic system, inflation is now regarded by many as the Great Saviour. In Japan and Hong Kong, where the cycle of retreating prices has now been sustained for four years, it has become an article of faith for policymakers and analysts that until prices begin rising, the two economies will remain mired in stagnation. Put at its simplest, the argument rests on the observation that so long as consumers see prices continuing to fall, they will hold off making anything but the most essential purchases. And why not? That is the most sensible reaction in the circumstances. But while that might suit the budgeting plans of the average householder in Hong Kong, it does no good at all for the economy at large, which relies on increased spending to fuel growth. Instead, as we point out today, consumers have been sitting on their wallets, and this attitude has helped contribute to a 66 per cent fall in property prices. While property prices have borne the brunt of the deflationary spiral, other goods and services have not escaped unscathed. Rents are down 20 per cent and the composite consumer price index is down 11.5 per cent over the period. Plainly this is not all a bad thing. Hong Kong shoppers are benefiting from lower prices; albeit at the expense - for those who have kept their jobs - of frozen or lower wages. Many have not been so lucky, and have lost their jobs as an outcome of a deflationary spiral that delivers decidedly mixed blessings. New home buyers have benefited, most notably from sharply lower house prices and falling mortgage rates, albeit at the expense of those who paid top dollar for their homes in 1998 and today are sunk in a 'negative equity' trap - with homes now valued way below the outstanding debt they raised to buy the properties. On balance, therefore, most policymakers and analysts agree that while deflation has been useful in pricking Hong Kong's asset-price bubble, the time is long overdue for a little old-fashioned inflation to re-enter the system. Clear and coherent government policies - and not the mixed signals of the recent past - could help provide that spark.