TOKYO: Japanese inflation slowed further in September as consumers tightened their purse strings, data showed Friday, fuelling concerns that a tax hike this year could derail the nation's economic recovery.
The internal affairs ministry said Japan's core consumer inflation, stripping out volatile fresh food prices, came in at 3.0 percent year-on-year, down from 3.1 percent in August.
Prices rose from year-earlier levels largely because the government raised sales tax from 5.0 percent to 8.0 percent on April 1, which drove up retail prices.
Separate data from the ministry showed household spending in September plunged 5.6 percent from a year earlier.
It was worse than a market median forecast of a 4.2 percent drop and extended declines to a sixth straight month since April.
Price rises stemming from the tax hike appeared to be easing as inflation growth slowed from 3.3 percent in both July and June and a three-decade high of 3.4 percent in May.
Excluding the impact of the tax increase, the September rise in core consumer prices was 1.0 percent, according to a formula by the Bank of Japan (BoJ).
The rate is the half of the bank's ambitious 2.0 percent inflation target for next year.
"Looking ahead, we think that inflation will moderate further towards year-end rather than accelerate as expected by the Bank," said Marcel Thieliant, Japan economist at Capital Economics.
"The upshot is that the BoJ will still have to provide additional stimulus," he said in a note.
The internal affairs ministry also said the nation's jobless rate inched up to 3.6 percent in September from 3.5 percent in August.
"The renewed rise in unemployment last month shows that the labour market is no longer tightening, and we think it will start to slacken in earnest soon," Thieliant said.
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