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Japan’s Consumer Prices Fall for Third Month Despite BOJ Efforts

Japan’s consumer prices continued to slide in May, putting more pressure on the Bank of Japan to expand monetary stimulus at its meeting later this month.

Consumer prices excluding fresh food fell 0.4 percent in May from a year earlier, after dropping 0.3 percent in April and March, according to a statistics bureau report on Friday. Economists in a Bloomberg survey forecast a decline of 0.4 percent.

The report underscores the challenges facing Prime Minister Shinzo Abe and Bank of Japan Governor Haruhiko Kuroda as they attempt to pull Japan out of deflationary malaise and achieve the distant 2 percent inflation goal. The U.K.’s vote to leave the European Union is accelerating gains in the yen -- which strengthened about 8 percent against the dollar in June -- and heightening the risk of lower import prices and inflation in coming months. The currency began strengthening early in 2016.

“Japan’s inflation rate will probably stay in the minus territory for the time being,” Yoshiyuki Suimon, an economist at Nomura Securities in Tokyo, said before the report was released. “It’s really difficult to achieve the price goal,” he said, adding that further easing by the BOJ at its July 28-29 meeting is a possibility.

The effects of a weaker yen in previous years, which pushed up import prices, are wearing off and that’s contributing to the decline in core CPI, Nomura’s Suimon said. Also, low energy prices, which are still below last year’s level even as oil prices have risen recently, continue to push down core CPI, he said.

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