Prime minister Shinzo Abe has spent the previous four years attempting to coax consumers into spending more
Shinzo Abes mission to lift Japan from the deflationary spiral which has harassed its market for 2 decades suffered another setback on Friday after data revealed yearly consumer prices had dropped for the very first time in four years.
The data will enhance the prime ministers discouragement that years of substantial monetary easing and fiscal stimulation have up to now neglected to drag Japan from the deflationary abyss, even though the recent recovery in petroleum costs offers some cause for confidence.
Since he became prime minister for another time four years back, Abe and his allies in the Bank of Japan have now been pinning their hopes on his three-arrow policy of monetary easing, financial stimulation and structural reform known as Abenomics to coax consumers into spending more.
But government data released on Friday showed core consumer prices, including petroleum products but exclude volatile fresh food, had dropped 0.3% in 2016 from a year earlier, amid poor family spending and conservative wage hikes.
The 0.2% fall for December was somewhat less than anticipated, but still represented a 10th straight monthly fall.
Japan has dropped even further for achieving its challenging inflation target that was 2%. The Bank of Japan, whose board will hold a policy assembly next week, now expects to achieve that goal by March 2019, four years behind program.
BoJ officials have attributed outside variables, including poorer performances by emerging markets and falling energy costs, for the amounts that were unsatisfactory.
Some analysts consider monthly consumer costs will bounce back after this season in crude oil costs as well as a weaker yen, which raises the price of imports.
The yen has dropped more than 10% against the United States dollar since Donald Trump was elected president in November, although his success in addition has triggered concern in Japan regarding the near future of bilateral commerce following his selection to get in the Trans-Pacific Partnership free trade deal.
As energy costs recuperate costs may begin to turn favorable, but inflation is not likely to rally strongly for now, said Hideaki Kikuchi, an economist at Japan Research Institute. Consumer spending is poor and wage hikes have slowed.
Others warned against relying on outside variables alone to speed inflation up.
Consumer prices will begin growing ahead. But in the type of pay increases, firms must more actively distribute their gains for inflation to strategy 2%, based on chief economist at Norinchukin Research Institute, Takeshi Minami.
Cable services contributed to the report