TOKYO – Japan's inflation rate edged lower in October, highlighting the difficulty Prime Minister Shinzo Abe faces in his campaign to overcome deflation in the world's third-largest economy.
The core consumer price index, excluding fresh foods, rose 2.9 percent from a year earlier, compared with 3.0 percent the month before, according to data released Friday. Excluding the impact of a 3 percentage point sales tax hike in April, it rose 0.9 percent, which would be the slowest increase in a year.
The April tax hike, to 8 percent from 5 percent, broadsided the recovery as consumers and companies cut back on spending after splashing out early in the year. Retail spending and household incomes also fell in October from a year earlier, though by a smaller margin than in recent months.
Japan slipped back into recession in the last quarter, prompting Abe to put off plans for another tax hike next year, just weeks after Japan's central bank expanded its monetary easing measures that are injecting tens of trillions of yen (hundreds of billions of dollars) into the economy.
Bank of Japan Gov. Haruhiko Kuroda has vowed to do whatever it takes to pry the country out of its two decade deflationary slump, which can discourage spending and investment. He also has urged companies to do more to increase wages, to help counter the decline in purchasing power that is squeezing consumer demand.
The additional monetary easing has had the side effect of pushing the Japanese yen sharply lower, raising costs for imported energy and food that have helped to keep prices rising since Abe and Kuroda set a 2 percent target for inflation, excluding the impact of tax hikes, in early 2013.
But the recent drop in crude oil prices will relieve some price pressure and slow progress toward meeting that goal.
Reflecting its lessening influence over oil supplies and pricing, OPEC decided Thursday to keep its output target on hold. In response, the price for Brent crude oil, a global benchmark, plunged $5 on Thursday to a four-year low of $72.76 a barrel. As recently as June it was around $115.
"Price pressure should continue to moderate until year-end, as the recent plunge in crude oil prices has yet to be reflected in the cost of energy imports," Marcel Thieliant of Capital Economics said in a commentary Friday.
Other data for October were mixed. Industrial output edged up from the month before but fell 1 percent from a year earlier. The unemployment rate eased slightly.