TOKYO • Japan's consumer prices fell for a seventh straight month and household spending slumped again in September, underscoring the challenges Prime Minister Shinzo Abe and Bank of Japan (BOJ) governor Haruhiko Kuroda face in trying to revive the world's third-largest economy.

The downbeat inflation and spending data came despite an increasingly tight labour market. The unemployment rate slipped to 3 per cent last month, equal to the lowest since 1995. This figure has not yet resulted in significant wage gains, a key element of efforts to reflate Japan's economy.

Consumer prices excluding fresh food, the BOJ's primary gauge of inflation, dropped 0.5 per cent last month from a year earlier. Household spending fell 2.1 per cent from a year earlier. It has fallen in 11 of the past 12 months.

The BOJ's policy board may revise its inflation outlook and projected timeframe for hitting its 2 per cent target when it meets between Monday and Nov 1. It has been trying for more than three years to reach that goal with extraordinary monetary easing.

Few economists think the BOJ's current projection of reaching the goal sometime in the fiscal year ending March 2018 is realistic. A stronger yen this year has pushed down import prices, and households faced with weak wage gains have restrained spending. Yet a strong majority of economists surveyed by Bloomberg News expect the BOJ to keep its easing programme unchanged next week, after it shifted the focus of its policy framework last month from expanding the monetary base to controlling interest rates.

Capital Economics' senior Japan economist Marcel Thieliant said in a note that cheaper energy's drag on prices in Japan is fading, but underlying inflation continues to slow, largely due to a sharp strengthening of the yen this year.

Overall consumer prices fell 0.5 per cent. Consumer prices excluding food and energy were unchanged.

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