Tokyo consumer prices fall for first time in three years, revive deflation worries

By Leika Kihara

TOKYO (Reuters) – Core consumer prices in Tokyo fell for the first time in three years in April, a sign that slumping energy costs and weak demand due to the coronavirus pandemic are heightening the risk of a return to deflation for the fragile economy.

The weakness in Tokyo prices, which are a leading indicator of nationwide inflation trends, underscores market expectations that Japan will see consumer prices fall in coming months as the economy feels a sharper hit from the pandemic.

The core consumer price index for Japan’s capital, which includes oil products but excludes volatile fresh food prices, slid 0.1% in April from a year earlier, government data showed on Friday.

The drop compared with a median market forecast for a 0.1% rise and followed a 0.4% increase in March. It was the first annual decline since April 2017.

Some economists believe the world’s third-largest economy has already slid into a deep recession as government requests for citizens to stay home and businesses to shut down chill consumption, while strict virus lockdowns in many countries around the world have triggered a collapse in global trade.