Japan's core CPI falls again, household spending slumps in October

An employee places a new price sign on bottles of coffee at an Aeon Co. supermarket in Chiba, Japan.
Tomohiro Ohsumi | Bloomberg | Getty Images

Japan's core consumer prices fell for the third straight month and household spending slumped in October, underscoring the fragile nature of the economy and keeping policymakers under pressure to take further steps to jump-start growth.

The core consumer price index (CPI), which excludes volatile fresh food but includes oil costs, fell 0.1 percent in the year to October, government data showed on Friday, matching a median market forecast.

The decline was, however, predominantly due to the effect of falling energy costs, which the Bank of Japan has said it will look through in determining whether additional monetary easing is necessary to achieve the inflation target.

Separate data showed household spending fell 2.4 percent in October from a year earlier, against a median market forecast for a 0.1 percent rise, reflecting anemic wage growth.

Why Japan's new stimulus won't work

Japan relapsed into recession in July-September and consumer prices have slid on oil price falls and weak household spending, casting doubt on the BOJ's view that a solid economic recovery will accelerate inflation to its 2 percent target by early 2017.

Nearly half the analysts polled by Reuters expect the BOJ to ease in January, when continued declines in oil costs may force the bank to cut its quarterly inflation forecasts yet again.

But many BOJ officials are reluctant to expand an already massive stimulus program unless weakness in overseas demand persists long enough to dent business confidence, discouraging companies from boosting investment and wages.

BOJ minutes reveal output gap worry; Japan raises minimum wage

The government has pressured companies to spend their record profits on wages and capital expenditure, with little success so far despite a tightening job market.

Data due out on Friday showed Japan's jobless rate fell to 3.1 percent in October from 3.4 percent in the previous month. The median forecast was for 3.4 percent. The jobs-applicants ratio stood at 1.24 in October, unchanged from the previous month.