OECD: End nears for Japan's deflationary spiral
May 29, 2013 -- Updated 1107 GMT (1907 HKT)
A shopping street in the Japanese city of Osaka on February 6, 2013.
- OECD says consumer prices in Japan will begin rising later this year
- Economy has suffered a 14-year downward drift in prices
- Reforms launched by new leader Shinzo Abe are boosting economy
- OECD warns that high debt levels pose an "exceptional challenge"
Hong Kong (CNN) -- Japan's robust economic recovery this year could put an end to a deflationary spiral that has sapped growth for some 14 years, says the Organisation for Economic Cooperation and Development (OECD).
In its annual economic outlook, the OECD projects Japanese consumer prices will begin rising modestly by the end of this year, with the inflation rate reaching 2.4% by the end of 2014.
"Aggressive monetary easing could see deflation give way to moderately positive underlying inflation in Japan," the report said.
In recession as recently as last year, Japan's economy grew at an annual rate of 3.5% in the first three months of 2013, much quicker than the 2.7% expected by analysts.
Why is the Nikkei having issues?
Can 'womenomics' save Japan?
Japan tries to revive economy
The brighter economic outlook stems largely from reform efforts launched by Prime Minister Shinzo Abe -- a set of policies dubbed "Abenomics."
READ: Japan: Is Abenomics working?
As part of a three-pillar strategy announced in January, Japan has ramped up government spending and the country's central bank is injecting money into the economy on a massive scale.
It hopes to bring the inflation rate to 2% and put to an end to a downward drift in consumer prices that has persisted for 14 years, undermining business and consumer confidence in the world's third largest economy.
The moves have led to a rally in the Nikkei stock index and a slide in the yen that has made corporate Japan more competitive overseas.
Also promised are structural reforms such as increasing the participation of women in the workforce.
READ: Can 'womenomics' save Japan?
"Reflecting a determined policy approach, the economic outlook has changed markedly in Japan in recent months," the report said.
However, the OECD warned that Japan's economic recovery was "surrounded by uncertainty" given the country's high debt levels, which amount to more than 200% of gross domestic product (GDP).
"In Japan, the key risk is that the unsustainable fiscal position will eventually affect financial markets and provoke a crisis of confidence," the report said.
"Bringing the debt ratio back to safe levels from its current highs will be exceptionally challenging."
Part of complete coverage on
December 10, 2013 -- Updated 1900 GMT (0300 HKT)
Presidents and prime ministers, celebrities and royals joined tens of thousands of South Africans to pay tribute to Nelson Mandela.
December 10, 2013 -- Updated 1235 GMT (2035 HKT)
President Obama pays tribute at the Mandela Memorial: "Mandela reminds us that it always seems impossible until it is done," he said.
December 9, 2013 -- Updated 2311 GMT (0711 HKT)
Until he returned home this weekend, Merrill Newman -- an American held in North Korea -- had no idea what a story he'd become.
December 10, 2013 -- Updated 0246 GMT (1046 HKT)
Transportation throughout the inhospitable Arctic region may soon be revolutionized.
December 10, 2013 -- Updated 1430 GMT (2230 HKT)
There were no genetic tests 400,000 years ago, so our ancient relatives didn't know as much about themselves as we know about them now.
Theme parks, sports stadiums, and city squares are among the most popular destinations that people checked into on Facebook in 2013.
December 10, 2013 -- Updated 1653 GMT (0053 HKT)
At a time when many have lost faith in the global financial system, Bitcoin is being hailed as the future of e-commerce.
December 10, 2013 -- Updated 1346 GMT (2146 HKT)
Actress Eleanor Parker, nominated for three Oscars and known for her "Sound of Music" role, died Monday at 91, her family said.
December 10, 2013 -- Updated 1249 GMT (2049 HKT)
Director and actor Charlie Chaplin made Virginia Cherrill perform one scene -- in which she says just two words in a silent film -- 342 times.
December 10, 2013 -- Updated 1118 GMT (1918 HKT)
Each volunteer at Yekokeb Berhan in Ethiopia will take in 25 disadvantaged children as her own.
December 10, 2013 -- Updated 1611 GMT (0011 HKT)
The Web is set to change our lives over the next decade. This will also question the use of personal data and balancing new powers with ethics.
December 10, 2013 -- Updated 2123 GMT (0523 HKT)
Browse through images you don't always see in news reports, taken by CNN teams all around the world.
He was imprisoned for life but that did not quiet him. Nelson Mandela became South Africa's first black president, and an icon and inspiration.
Today's five most popular stories