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Japanese inflation sinks to new low Japanese prices continue to slide
(about 2 hours later)
Japan's consumer prices dropped for the fifth consecutive month in July, adding to pressure on the government to expand its already massive stimulus programme.Japan's consumer prices dropped for the fifth consecutive month in July, adding to pressure on the government to expand its already massive stimulus programme.
The data was worse than estimates had suggested and marked the biggest annual drop in more than three years.The data was worse than estimates had suggested and marked the biggest annual drop in more than three years.
The consumer price index, which excludes volatile food prices, fell by 0.5% compared with a year earlier.The consumer price index, which excludes volatile food prices, fell by 0.5% compared with a year earlier.
Tokyo has been trying to raise inflation for years to stimulate spending and boost the economy.Tokyo has been trying to raise inflation for years to stimulate spending and boost the economy.
The disappointing data comes on the heels of weaker-than-expected economic growth released earlier this month and despite an aggressive spending policy by the government.The disappointing data comes on the heels of weaker-than-expected economic growth released earlier this month and despite an aggressive spending policy by the government.
In July Prime Minister Shinzo Abe announced the latest stimulus effort, a massive new package worth 28 trillion yen ($265bn; £200bn).In July Prime Minister Shinzo Abe announced the latest stimulus effort, a massive new package worth 28 trillion yen ($265bn; £200bn).
Japan has been desperate to boost consumer spending for years which accounts for 60% of the economy.Japan has been desperate to boost consumer spending for years which accounts for 60% of the economy.
The government's policy of economic reforms - dubbed Abenomics - consists of a three-pronged fiscal, monetary and structural approach to lifting the economy out of its protracted slump.The government's policy of economic reforms - dubbed Abenomics - consists of a three-pronged fiscal, monetary and structural approach to lifting the economy out of its protracted slump.
The three arrows: explaining AbenomicsThe three arrows: explaining Abenomics
Yet despite three years of Abenomics, inflation has remained significantly lower than the central bank's 2% goal.Yet despite three years of Abenomics, inflation has remained significantly lower than the central bank's 2% goal.
Persistently weak household spending is to blame combined, more recently, with a strengthening yen which has pushed down import prices.Persistently weak household spending is to blame combined, more recently, with a strengthening yen which has pushed down import prices.
Analysts expect the rate to remain low or even fall further.Analysts expect the rate to remain low or even fall further.
"As such, inflation expectations may weaken further in coming months," Marcel Thieliant, senior economist at Capital Economics said in a note."As such, inflation expectations may weaken further in coming months," Marcel Thieliant, senior economist at Capital Economics said in a note.
"The Bank of Japan has recognised that there are considerable risks to its forecast of hitting its 2% inflation target in the coming fiscal year. We therefore continue to expect more stimulus to be introduced at the Bank's September meeting.""The Bank of Japan has recognised that there are considerable risks to its forecast of hitting its 2% inflation target in the coming fiscal year. We therefore continue to expect more stimulus to be introduced at the Bank's September meeting."