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Japan core inflation drops to three-year low

Aug 26, 2016, 1:34 AM EDT
Japan's Prime Minister Shinzo Abe
(Source: Presidencia de la República Mexicana/flickr)

Tokyo’s efforts to tackle a persistent deflation took another hit on Friday, as new data showed that Japan’s core Consumer Price Inflation (C.P.I.) dropped for the fifth consecutive month in July. The 0.5 percent drop in inflation marks the biggest annual decline in more than three years. The deflationary pressures continue to intensify despite Prime Minister Shinzo Abe’s announcement of a massive stimulus package worth 28 trillion yen last month.

Japan’s “three-pronged” policy of economic reforms, with fiscal, monetary and structural approach to tide over the protracted slump, has proved ineffective in the past three years, reports the BBC. Analysts blame weak household spending and the recent strengthening of yen for the current inflation rate, which is significantly lower than the central bank's two percent target.

Japan’s consumer spending, which accounts for 60 percent of the country’s economy, hasn’t seen an expansion for years despite desperate stimulus measures by the government.

Economists and investors expect the Bank of Japan to announce additional easing measures at its upcoming policy meeting in September, writes France24. In July meeting, the central bank left its 80 trillion yen annual bond-buying program unchanged, sending a wave of disappointment in the markets.