Japan's key consumer price index fell 0.5 percent in November from a year earlier for the 21st consecutive month of decline, the government said Tuesday, underscoring persistent deflationary pressure weighing on the nation's economy.
The pace of decline in the core nationwide CPI, which excludes volatile fresh food prices, slowed slightly from a 0.6 percent drop the previous month. Economists had predicted a 0.6 percent fall, according to the median forecast in a Kyodo News survey.
The result reflects sluggish domestic demand and a persistently strong yen, indicating there is little chance the core CPI will turn positive in fiscal 2011 starting April, some economists said.
Sharp discounts on durable goods, such as flat-panel televisions, and the continuing effects of the government's high school tuition waiver program introduced in April contributed to the core CPI drop, a preliminary report by the Ministry of Internal Affairs and Communications showed.
Meanwhile, prices of cigarettes surged 38.6 percent due to a tax hike introduced Oct. 1. Cigarette prices jumped 100 yen or more per pack for many brands.
Prices of flat-panel televisions dropped 33.2 percent and those of refrigerators fell 19.9 percent. Tuition fees declined 17.4 percent and housing rents went down 0.4 percent.
The core nationwide CPI stood at 99.4 against the base of 100 for the ministry said.
"Although the pace of the decline slowed somewhat (from the previous month), the deflationary trend is continuing," said Yoshiki Shinke, senior economist at Dai-ichi Life Research Institute.
He said it would be difficult for the core nationwide CPI to come out of negative territory in the next fiscal year, unless oil and commodity prices rise sharply.
The Bank of Japan forecasts the core CPI will rise 0.1 percent in fiscal 2011. The central bank has vowed to retain its virtual zero- interest-rate policy until it judges that "price stability is in sight" to support the Japanese economy, overshadowed by a strong yen.
A higher yen undermines the overseas price competitiveness of Japanese exporters, a key driving force in the nation's economy, and erodes the value of their earnings when repatriated. It could also lead to lower import prices.
The core CPI for Tokyo's 23 wards, a leading indicator of national price trends, fell 0.4 percent in December from a year earlier to 98.9, the ministry said. The pace of decline matched the average projection. The Tokyo metropolitan area's reading declined 1.2 percent in 2010, after falling 1.0 percent in 2009.
Separate data released by the ministry showed that average monthly household spending in November fell 0.4 percent from a year earlier to 284,212 yen in real terms. The decline reflects reduced spending on vegetables and winter clothing.
The result compares with the average projection of a 0.3 percent rise in a Kyodo News survey.
The average monthly income of salaried households grew a real 0.5 percent to 431,281 yen.
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