TOKYO (REUTERS) - Japan's core consumer prices fell 0.3 per cent in April from a year earlier, the second straight month of declines, keeping the central bank under pressure to deploy additional stimulus to achieve its ambitious 2 percent inflation target.
The data underscores the fragile nature of Japan's recovery and may give Prime Minister Shinzo Abe justification to delay a scheduled increase in sales tax next year.
The drop in the nationwide core consumer price index (CPI), which includes energy but excludes volatile fresh food costs, was slightly smaller than a median market forecast for a 0.4 per cent fall, data from the Internal Affairs Ministry showed on Friday (May 27). It matched the pace of decline in March.
"The current decline in CPI is driven not just by oil prices but price declines of other goods," said Junichi Makino, chief economist at SMBC Nikko Securities. "This marks a change in the price trend and is a sign Japan is reverting back to deflation," he said, adding that the BOJ may ease policy at next month's rate review.
Core consumer prices in the Tokyo area, which is a leading indicator of nationwide price trends, fell 0.5 per cent in the year to May, more than a median market forecast for a 0.4 per cent decrease, the data showed.
The BOJ stunned markets in January by adding negative interest rates to its massive asset-buying programme in a fresh effort to accelerate inflation to its 2 per cent target.
But the move has failed to brighten public sentiment or arrest an unwelcome rise in the yen that hurts exports and weighs on inflation by pushing down import costs.
Anaemic inflation has forced the BOJ to push back the expected timing for hitting its price target to around early 2018, though many analysts say even the new forecast is too ambitious given slow wage growth and a sluggish economy.
Japan's economy narrowly averted recession in the first quarter of this year and many analysts expect it to barely grow in the current quarter as weak emerging market demand weighs on exports and tame wage growth hits household spending.