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Japan's core consumer prices dropped 1.0% in December from a year earlier, the steepest fall in over 10 years, due largely to lower energy prices and the government's travel subsidy campaign, amid the coronavirus pandemic, official data showed Friday.

Nationwide core consumer prices, excluding volatile fresh food items, logged the largest drop since a 1.1% fall in September 2010 and declined for the fifth straight month, according the Internal Affairs and Communications Ministry. The core consumer price index fell 0.9% in November.

In 2020, the core CPI dipped 0.2% on average, marking the first decrease in four years and remaining far below the Bank of Japan's 2% inflation target.

BOJ Gov. Haruhiko Kuroda on Thursday shrugged off concerns that the Japanese economy could slip into deflation.

"Recent falls in the CPI are temporary as they have resulted from lower crude oil prices and the travel subsidy program," he said during a news conference following the central bank's two-day policy meeting, adding that the risk of deflation is "not high."

"The yearly fall is largely attributed to lower crude oil prices amid the global coronavirus pandemic and the government's free preschool education program launched in October 2019," a ministry official said.

In December, electricity and gas bills fell 7.9% and 9.5%, respectively, reflecting lower energy prices in the first half of 2020.

Gasoline prices went down 8.9% due to falling crude oil prices in the reporting month, while prices for kerosene products dived 14.4%.

Accommodation fees plunged 33.5% from the previous year due to the Go To Travel subsidy program, the government's bid to revive the domestic tourism industry hit hard by the pandemic.

The survey was conducted between Dec. 4 and 5, before Prime Minister Yoshihide Suga halted the nationwide travel campaign in late December due to a resurgence of virus infections across Japan. The program effectively lowered the CPI by 0.4 percentage point in the month, the official said.

"Weak consumption in the services sector put pressure on overall prices, as people refrained from traveling and having parties in the year-end and New Year holidays following a resurgence of virus infections," said Takeshi Minami, chief economist at the Norinchukin Research Institute.

"COVID-19 vaccinations could revive demand if proven to be effective, but it remains unclear whether consumption will recover to the pre-pandemic level," he added.

So-called core-core consumer prices, which exclude fresh food and energy items, dropped 0.4% in December from a year before, marking the third straight month of decline.

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