TOKYO, May 18 (Xinhua) -- Japan's underlying inflation rate slowed from March to 0.7 percent in April owing to a contraction in energy prices, the government said in a report Friday, underscoring the uphill challenges the Bank of Japan (BOJ) is facing to achieve its 2 percent inflation target.
The core consumer price index, which excludes fresh food prices because of their volatility, increased 0.7 percent year-on-year to 100.9 against the 2015 base of 100, the Ministry of Internal Affairs and Communications said.
The year-on-year change in the core consumer price index was positive in the recording month, the ministry said, which marked the 16th consecutive month of positive readings.
This was helped by rising oil prices, according to the latest data set, although gains had markedly dropped from the 0.9 percent reading booked in March and follow a 1.0 percent increase logged in February.
Overall, the latest figure came in below median market forecasts for an increase of around 0.8 percent, with the weak data revealing the BOJ is continuing to struggle to achieve its lofty 2 percent inflation target despite its massive monetary stimulus measures.
According to an official from the statistics bureau, the index's gains were impacted by a fall in mobile phone prices following a sharp increase in the previous month and while electricity prices increased in the recording month, the pace was far slower than had been previously, the official noted.
This led to the core CPI dropping to its weakest gain since September, the government's data showed.
Meanwhile, the ministry said the "core-core" CPI, which excludes both fresh food and energy prices, increased 0.4 percent from a year earlier to 101.0, but had dropped from a 0.5 percent increase booked in March.
The BOJ has routinely opted to maintain its ultra-easy monetary policy as its 2 percent inflation goal remains some way off, despite the economy experiencing a relatively steady uptick.
This comes as a number of prominent central banks are tapering their easing measures or are back to raising interest rates.
The BOJ, however, continues to maintain its yield curve control rate of minus 0.1 percent and government bond purchases aimed at guiding the 10-year yield to around zero percent, as well as keeping its purchases of exchange-traded funds (ETFs) and other risky assets as part of its market support.
BOJ Governor Haruhiko Kuroda has said that the bank's 2 percent inflation target is still achievable, but that the reference to a specific date was pulled from its quarterly economic outlook because financial markets were taking the date to mean a hard deadline.
The bank's chief said the date was meant to work as a forecast as opposed to a clear cutoff point, stating that the time frame was always a forecast and not a binding deadline for the bank's goal.
The bank has, on numerous occasions, pushed back the time frame for achieve its 2 percent goal, and has now opted to not reference it, leading economists have pointed out.
Japan is still struggling with deflationary pressure and in terms of the price outlook there are too many variables to provide a hard deadline, Kuroda said recently, admitting that in reality it is taking more time than the bank expected to achieve its 2 percent inflation target and that there are various uncertainties to the price outlook.
The BOJ, furthermore, has not ruled out further easing monetary policy to hit its inflation target if the economy were to lose momentum.
And this, indeed, could be the case.
Japan's economy shrunk at an annualized rate of 0.6 percent in the January-March quarter contracting for the first time in nine quarters, government data showed Wednesday.
According to the Cabinet Office, the fall in gross domestic product in the recording period was owing to a slowdown in private consumption and capital expenditure.
The latest preliminary reading comes on the heels of a downwardly revised 0.6 percent annualized rate of expansion logged in the fourth quarter, the government's data showed.
On a quarter-on-quarter basis, GDP shrank 0.2 percent in inflation-adjusted terms, the Cabinet Office said.
Japan's economy last posted negative growth in the October-December quarter in 2015 when it contract an annualized 1.1 percent.
Prominent economists have said that while Japan's economy has been on a growth streak, a significant drop in private consumption which accounts for around 60 percent of GDP and a pull back in capital expenditure, as well as a likely slump in production in the coming months, make the future outlook for Japan's economy somewhat hazy.
The BOJ has identified the fact that companies' wage and price-setting behavior remains cautious and this has had a knock-on effect on household spending and has somewhat scuppered the government's aims for a domestic demand-led economic recovery.
As the central bank here has pointed out, when stripping away the effect of energy price moves, inflation remains on a particularly weak note despite the economy's expansion and the narrowing output gap.