• Kyodo

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Consumer prices fell 0.3 percent in March compared with a year earlier due to lower energy prices, the government said Thursday, leaving the Bank of Japan far behind in its quest to stoke 2 percent inflation.

The core consumer price index, which excludes volatile fresh food prices, stood at 102.7 against the 2010 base of 100, the Internal Affairs and Communications Ministry said. The size of the decline, the first in five months, was the largest since April 2013, when the BOJ began its unprecedented quantitative and qualitative monetary easing policy.

Energy prices plunged 13.3 percent from a year earlier amid declining crude oil prices, sending gasoline prices sliding 20.5 percent and electricity 9.0 percent.

The inflation rate entered negative territory despite the central bank’s efforts to raise consumer prices via monetary easing, including an asset-purchase program and more recently, the adoption of negative interest rates.

Separate government data meanwhile show that average monthly household spending in March fell an inflation-adjusted 5.3 percent from a year earlier to ¥300,889 following a 1.2 percent gain in February.

Junichi Makino, chief economist at SMBC Nikko Securities Inc., said prices of goods other than energy are expected to start falling due to a firming yen, while a deflationary mindset remains in place as consumers choose to save money until prices start dropping again.

“With the market becoming skeptical, the BOJ needs to show its aggressive stance to fight deflation,” Makino said, adding that the central bank may decide to ease monetary policy further.

The core CPI for Tokyo’s 23 wards in April, seen as indicating nationwide price moves down the road, shed 0.3 percent from a year earlier to 101.7 for the fourth straight monthly decline, according to the data released by the ministry.

In fiscal 2015 ended in March, the core CPI was flat from the previous year at 103.2, with rises in food and durable goods offsetting declines in energy-related prices.

According to the ministry’s data on household spending, expenditure on clothing dived 12.2 percent due to sluggish sales of spring clothes amid cooler weather, while that for transportation and communication fell 12.1 percent due to weak automobile sales.

The ministry kept intact its basic assessment, saying weakness is being seen in household spending.

Income at salaried households rose a real 0.3 percent to an average of ¥450,698, marking the first rise in seven months.

Household spending figures are a key indicator of private consumption, which accounts for about 60 percent of gross domestic product.

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