TOKYO: Japan's core consumer prices fell in October at their fastest annual pace 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 its elusive 2% inflation target.
A resurgence in coronavirus infections also clouds the outlook, as it may hurt consumption and dent the boost to growth from the government's stimulus measures, they said.
Core consumer prices, which exclude 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.