TOKYO”•Japanese inflation continued to disappoint in July, according to data released on Friday, with consumer prices dropping for a fifth straight month in the latest blow to Tokyo’s faltering war on deflation.
The 0.5 percent decline in July was worse than the 0.4 percent average fall expected by economists.
Friday’s data come ahead of household spending numbers next week, which are also expected to be disappointing, and after Japan’s July exports suffered their sharpest monthly fall in seven years.
Japanese officials are under intense pressure to deliver, as many economists increasingly write off Prime Minister Shinzo Abe’s faltering bid to fire up the world’s number three economy, dubbed Abenomics.
Last week, official figures showed the economy registered zero growth on-quarter, falling below economists’ expectations for a modest 0.2 percent expansion, as weak exports and a fall in business spending dented activity.
The weak inflation figures will heap more pressure on Japan’s central bank for another round of stimulus.
The Bank of Japan disappointed markets at its late July meeting when it opted to leave its 80 trillion yen ($796 billion) annual bond-buying program”•a cornerstone of Abenomics”•unchanged.
The BoJ holds its next meeting in late September.
Tokyo recently announced a whopping 28-trillion-yen package aimed at kick-starting growth, after Britain’s June vote to quit the European Union sent financial markets into a tailspin and sparked a yen rally.
Japan’s major exporters have seen their bottom line dented by the sharp rise in the currency, which makes them less competitive overseas and shrinks the value of repatriated profits.
The problem was highlighted as many of the county’s best-known firms, including Sony and Toyota, reported lower profits in the three months to June.
Wild volatility on global financial markets since the start of the year and Britain’s shock decision to leave the EU have stoked demand for Japan’s currency, which is seen as a safe investment in times of turmoil.
Abe’s plan”•a mix of massive monetary easing, government spending and red-tape slashing”•initially brought the yen down from record highs, setting off a stock market rally and boosting corporate profits.