Japan's consumer prices fall at fastest pace in decade


  • Economy
  • Friday, 20 Nov 2020

Analysts expect consumer prices to continue falling in coming months due to sluggish consumption, casting doubt on the central bank's view Japan will eventually see prices bounce back towards the central bank's elusive 2% inflation target.

TOKYO: Japan's core consumer prices fell in October at their fastest pace annual in nearly a decade as the boost from last year's sales tax hike petered out, heightening fears of a return to deflation for an economy still dealing with COVID-19.

Analysts expect consumer prices to continue falling in coming months due to sluggish consumption, casting doubt on the central bank's view Japan will eventually see prices bounce back towards the central bank's elusive 2% inflation target.

The nationwide core consumer prices, which excludes volatile fresh food costs, fell 0.7% in October from a year earlier, government data showed on Friday, matching a median market forecast.

It was the third straight month of declines and the biggest year-on-year drop since March 2011, the data showed.

The decline was largely a result of the high base effect of a boost to inflation last year, following a sales tax hike to 10% from 8%, as well as a more recent government discount campaign for domestic travel aimed at reviving tourism, which weighed on prices.

Prices also fell for gasoline, fuel and hotel accommodation, the data showed.

Japan's economy grew at the fastest pace on record in the third quarter, rebounding sharply from its biggest postwar slump, as exports and consumption recovered from the devastating damage caused by the pandemic.

But many analysts expect growth to slow again as a resurgence in infections clouds the consumption outlook.

- Reuters
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