The Australian - If the definition of stagflation is a condition where consumer prices are rising at a time when economic growth is stalling, Japan runs a high risk of falling into such a situation in the near term. Under such circumstances, if firms jack up their product prices, overall demand will wane and corporate profits will fall further. In the worst case scenario, companies may cut their employees' wages and reduce their work forces, putting the economy in a tighter spot across the board.