TOKYO (Nov 28): Japan’s consumer price gains slowed for a third straight month, challenging Bank of Japan Governor Haruhiko Kuroda’s effort to stoke faster inflation.

Consumer prices excluding fresh food increased 2.9 percent in October from a year earlier, the statistics bureau said today in Tokyo, matching the median projection in a Bloomberg News survey of economists.

Stripped of the effect of April’s sales-tax increase, core inflation -- the BOJ’s key measure -- was 0.9 percent.

Tumbling oil prices are complicating the task of stoking inflation in an economy that slid into recession last quarter.

The inflation number is the last key data point on consumer price changes before an election next month, with Prime Minister Shinzo Abe seeking a renewed mandate for his economic growth strategy.

“Consumer prices gains are going to fall below one percent and stay there for a while,” Takeshi Minami, chief economist at Norinchukin Research Institute, said before today’s report.

“The BOJ can sit tight for now after acting last month. They will have to consider further easing next year.”

Kuroda said there was no limit to steps the BOJ could take to reach its two percent inflation goal after he led a divided board last month to increase stimulus.

He said last week the BOJ’s inflation gauge may fall below one percent, backtracking on his prediction in July that there was no such chance.

Jobless rate
Retail sales dropped more than forecast in October, falling 1.4 percent from the previous month. Household spending declined four percent from a year earlier.

Industrial production increased 0.2 percent in October from the previous month, the trade ministry said, against a median forecast for a decline of 0.6 percent in a separate Bloomberg survey.

The jobless rate declined to 3.5 percent.

The central bank cited a risk that weaker demand after a sales-tax hike and cheaper oil could delay an end to Japan's “deflationary mindset” when it boosted its already-unprecedented easing last month.

The downward pressure on prices from oil could cause core inflation to slow to 0.8 percent, according to Norinchukin’s Minami.

Energy prices
Energy prices dropped 0.8 percent from a month earlier, today’s report showed.

Abe last week postponed an increase in a sales tax set for next October after an April hike helped push the economy into two quarters of contraction, the fourth recession since 2008.

BOJ board member Sayuri Shirai, who was one of the five who supported last month’s decision to increase easing, said on Nov 26 a recovery in consumer spending has been weaker than expected.

Nine of 30 economists in a Bloomberg News survey forecast the BOJ would boost stimulus before the end of July, while 13 predicted action in August or later.

Living costs have been running ahead of incomes, squeezing household budgets and increasing the stakes for Abe’s plans to revive growth with the “third arrow” of Abenomics.

Inflation is outpacing gains in total cash earnings, which rose 0.7 percent in September from a year earlier. Adjusted for price changes, wages fell three percent in September, the 15th straight monthly decline.

The BOJ said this week it gave the first pay raise in nine years to its board and other executives.