Japan’s core consumer prices fell for a fifth straight month and marked the biggest annual drop in more than three years in July as more firms held back price hikes due to weak consumption, keeping the central bank under pressure to expand an already massive stimulus program.
The gloomy data reinforces a dominant market view that Premier Shinzo Abe’s stimulus programs have failed to dislodge the deflationary mindset prevailing among businesses and consumers.
The nationwide core consumer price index fell 0.5 % in July from a year earlier, government data showed on Friday. It exceeded a median market forecast for a 0.4 percent decline and was slightly bigger than a 0.4 % drop in June.
Underscoring Japan’s sticky deflationary mindset, the ratio of goods and services making up CPI that saw prices rise from a year earlier fell to 60.2 % in July from 62.3 % in June.
A majority of economists expect the BOJ to ease further next month, when it conducts a comprehensive review of the effects of its existing stimulus program.
Analysts expect consumer prices to pick up in or around early next year as the downward pressure from energy costs wanes, though any rebound may be tempered by soft consumption and a strong yen pressing down on the cost of imports.
Starting from this release, the government changed the base year for the price indices to 2015 and changed the components making up the indices to better reflect consumer spending trends in an overhaul it conducts once every five years.