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Consumer prices fell for the first time since June, casting doubt on the central bank’s forecasts for the world’s third-biggest economy to emerge from more than a decade of deflation.

Consumer prices excluding fresh food slid 0.1 percent in October from a year earlier, the statistics bureau said in Tokyo on Friday. Barclays Capital says declines may persist for two years even as the BOJ forecasts gains of 0.1 percent for the fiscal year starting in April and 0.5 percent in the following 12 months.

Commodity prices are sinking on the risk of another global slump, while a yen trading near postwar highs has cut the cost of imports. As Japan struggles to recover from the March disasters, declining prices may weigh on consumer spending and erode company profits.

“It’s highly probable that consumer prices will keep falling at a moderate pace as the effect of oil prices and the strong yen gradually surface,” said Yoshiki Shinke, a senior economist at Dai-ichi Life Research Institute in Tokyo. “Price growth isn’t in sight for Japan.”

Hungary lost its investment-grade rating at Moody’s Investors Service after 15 years, while German Chancellor Angela Merkel sent equity markets tumbling by rejecting joint euro-area bonds.

Finance Minister Jun Azumi said Friday that he’s cautiously watching currency markets after three interventions this year to weaken the yen. Standard & Poor’s said Thursday that Prime Minister Yoshihiko Noda’s administration hasn’t made progress in tackling the public debt burden, an indication it may be preparing to lower the nation’s sovereign debt rating.

The yen was trading at around 77 per dollar in Tokyo on Friday, compared with a postwar record of 75.35 last month.

Japan’s price declines in October were partly because of the fading effect of past increases in tobacco taxes and casualty-insurance fees, according to Shinke. Core prices in Tokyo, a harbinger for the nation, fell 0.5 percent in November. Beef-bowl restaurant chains Zensho Co. and Matsuya Foods Co. cut prices this month to boost sales.

“Our basic assessment is that the Japanese economy is going back to a slight deflationary condition until the middle of next year,” said Junko Nishioka, chief Japan economist at RBS Securities Japan Ltd. The Bank of Japan may consider more monetary easing in January or February, Nishioka said.

Azumi said Friday that no decisions have been made relating to a fourth extra budget, after the Mainichi newspaper reported earlier that the government and the ruling party will compile one, without saying where it got the information.

The International Monetary Fund said this week that without more rapid economic growth, the nation faces the risk that its fiscal situation will deteriorate “precariously.”

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