By Daniel Leussink
TOKYO (Reuters) – Japan’s core consumer prices fell for the first time in more than three years in April on an annual basis, as weak oil prices and coronavirus lockdown measures heightened deflation risks.
The April data was released shortly before the Bank of Japan (BOJ) kicked off an emergency policy meeting on Friday at which it is expected to set up a reward scheme for financial institutions that boost lending to small firms hit by the pandemic.
The weak price reading comes after the virus knocked the world’s third-largest economy into recession in the first quarter, as consumer and business activity slumped, derailing the BOJ’s efforts to achieve its elusive 2% inflation target.
The core consumer price index, which includes oil products but excludes volatile fresh food prices, slipped 0.2% in the year to April, government data showed on Friday, its first negative reading since December 2016.
That was below the median market forecast of a 0.1% decline, and followed a 0.4% increase in March.
Analysts expect consumer price deflation to deepen in the months ahead as the worsening economic outlook forces consumers to tighten their purse-strings and gasoline and utility costs to fall in line with weaker oil prices.
The so-called core-core price index, which excludes food and energy prices and is closely tracked by the central bank as a narrower gauge of inflation, rose 0.2% in April.
Japan has so far avoided the explosive surge in infections seen in many other countries, with 16,518 confirmed cases including 799 deaths as of Thursday, according to public broadcaster NHK.
While the government kept its state of emergency for the metropolitan area of Tokyo in place on Thursday, it lifted it for three western prefectures in the country, taking a step toward a gradual economic recovery.
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