Deflation must be avoided.

It drives down prices and it creates a so called deflationary spiral which the Japanese still did not manage to eradicate after more than ten years of dealing with it. The "animal spirit" as pioneered by Keynes, or the expectations of the consumer, are acting against the interests of the country - they expect the price to decrease so they put off spending for the future. Problem is, prices go down and down until they are no longer sustainable, and so companies collapse and Aggregate Demand in an economy falls below any sustainable level.

That is the main reason why we should avoid deflation. Not too mention it causes a severe shock in the financial markets, the loans suddenly become more expensive and before corrections are made it can take years, even tens of years.

Avoid deflation at all costs.