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Japan prices still falling

November 25, 2016

Japan's inflation rate has continued its slide, with consumer prices falling for the eighth month in a row - the longest string of declines in five years and underscoring the country's struggle to stop deflation.

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Japan Weihnachtsgeschäft 2015
Image: Imago/Zuma Press

In October, core prices - excluding fresh food - in the world's third largest economy were down 0.4 percent compared with the same month a year ago amid sluggish consumer spending and falling global energy prices, the government said Friday.

According to the data, the October decline was the eighth in a row, and comes several weeks after the country's central bank has pushed back its timeline for hitting its goal of around two percent inflation.

Japanese Prime Minister Shinzo Abe has made the fight against falling prices - also known as deflation - a main goal of his government. For more than two decades now, the growth in the world's third largest economy has been hampered by deflationary pressure on prices, resulting in weak consumer spending and subdued investment. 

After taking office in December 2012, PM Shinzo Abe launched his "Abenomics" growth blitz of big spending, easy money and structural reforms. The program sharply weakened the yen and set off a stock market rally that spurred hopes for a boost to economic activity. But growth remains fragile while inflation is far below target.

Deflation - When everything becomes cheaper!

Protracted battle

Bank of Japan (BoJ) governor Haruhiko Kuroda has pointed a finger at weak crude prices as the chief culprit behind the weakness. Earlier this month, the central bank said it expected to hit two percent inflation by March 2019 - four years later than its original target and the latest in a string of delays.

Yasunari Ueno, chief market economist at Mizuho Securities, said that Japan's fight against deflation has become "a prolonged war of attrition that is set to drag on."

The BoJ plan is to gradually boost prices under hopes that consumers would spend more, thus convincing firms to expand operations and getting the economy humming. However, wage growth has fallen below expectations in recent months, meaning workers have less money to spend.

uhe/jd (Reuters, AFP, dpa)