The data is likely to reinforce market expectations the Bank of Japan will keep monetary settings ultra-loose for a long period to help the economy emerge from the pandemic’s damage.
The drop in the core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices, compared with a median market forecast for a 0.7% fall and followed a 1.0% decline in December.
The so-called “core-core” CPI, which strips away the impact of both energy and fresh food costs, rose 0.1% from a year earlier, government data showed on Friday.
Japan’s economy expanded more than expected in the fourth quarter, extending the recovery from its worst postwar recession thanks to a rebound in overseas demand that boosted exports and capital spending.
But new state of emergency curbs rolled out in January cloud the outlook, underscoring the challenge policymakers face in preventing the spread of COVID-19 without choking off a fragile recovery. (Reporting by Leika Kihara; Editing by Sam Holmes)