The Bank of Japan’s key inflation gauge ground to a halt as consumer spending slumped, highlighting weakness in the nation’s recovery from recession. Consumer prices excluding fresh food rose 2 percent in February from a year earlier, less than a median estimate of 2.1 percent. The central bank’s measure that strips out last year’s sales-tax increase showed inflation at zero.
Declines in household spending and retail sales, even as the labor market tightens and prospects for wage gains improve, indicate the lingering effect of an increase in the sales tax last year. While BOJ Governor Haruhiko Kuroda has said that any drop in prices will be temporary and won’t stop the bank reaching its 2 percent target, economists surveyed by Bloomberg expect an extra dose of monetary stimulus by October.
“Households are still suffering from that sales-tax hike from last April,” Takuji Okubo, an economist who founded Japan Macro Advisors in Tokyo, said in a Bloomberg Television interview. “This is again bad news for the Japanese economy,” he said of the spending figures.
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