Japan consumer prices down for 5th straight month

Japan's key consumer prices fell 0.5 percent in March from a year earlier, marking the fifth straight month of decline, due partly to a drop in durable goods prices, the government said Friday, underscoring that the country remains mired in deflation.

The core consumer price index, excluding volatile fresh foods, stood at 99.5 against the 2010 base of 100, the Ministry of Internal Affairs and Communications said. Private-sector economists had forecast the index would drop.

The results suggest Prime Minister Shinzo Abe's economic policies dubbed "Abenomics," aimed at tackling the nation's more than decade-long deflation through drastic monetary easing and massive public spending, have yet to bear fruit.

But consumer prices are likely to start rising from this summer on the back of the yen's slide and higher energy prices, buoyed by a possible pickup in the global economy, as well as electric rate hikes across the country, some analysts said.

"With the economy both at home and abroad, the pace of consumer prices is expected to trend upward more strongly," said Takeshi Minami, chief economist at the Norinchukin Research Institute.

Under the new leadership of Haruhiko Kuroda as governor, the Bank of Japan on April 4 introduced a set of new monetary easing steps, including additional purchases of government bonds and risky financial assets, such as exchange-traded funds and real estate investment trusts.

The central bank has pledged to achieve its 2 percent inflation target within two years, arguing that deflation is a "monetary phenomenon."

In recent months, some data have signaled that consumer prices would go up, as inflation expectations have been growing amid hopes for economic recovery.

The core consumer price index rose 0.3 percent on month, while a survey conducted by the Cabinet Office showed earlier this month that 71.8 percent of households predict consumer prices in Japan will increase in the year ahead.

Mitsumaru Kumagai, chief economist at the Daiwa Institute of Research, however, said it would be "difficult" for the BOJ to attain the inflation target as consumer prices may only rise gradually, staying below 1 percent on a year-on-year basis.

By product, prices of durable goods for household use decreased 10.4 percent on year in March, with television prices plunging 18.7 percent, the ministry said.

Energy prices, meanwhile, gained 2.2 percent and gasoline prices climbed 0.6 percent against a backdrop of the depreciation of the yen and rises in global commodity prices. Electricity expenses grew 3.4 percent.

The latest data released by the Finance Ministry showed the yen weakened against the U.S. dollar by 16.1 percent on an average basis in March from a year earlier.

A falling yen usually drives up import prices. Japan imports more than 90 percent of its energy resources from overseas.

The core CPI for Tokyo's 23 wards in April, which indicates nationwide price moves down the road, fell 0.3 percent to 99.0.