TOKYO: Japan’s annual core consumer inflation slowed in February as gasoline costs fell for the first time in more than two years, keeping the central bank under pressure to maintain, or even ramp up, stimulus to accelerate price growth to its 2 per cent target.

The data adds to growing signs that Sino-US trade tensions and slowing global demand are hurting Japan’s economic expansion and business sentiment.

If the weakness persists, the Bank of Japan (BoJ) may be forced to cut its inflation forecasts again at next month’s rate review, analysts say, though policymakers are wary of expanding an already massive stimulus programme any time soon.

The nationwide core consumer price index (CPI), which includes oil products but excludes volatile fresh food costs, rose 0.7 per cent in February from a year earlier, government data showed on Friday, falling short of a median market forecast for a 0.8 per cent gain.

The slowdown from January’s 0.8 per cent increase was due largely to a 1.3 per cent drop in gasoline prices, which was the first year-on-year decline since November 2016, the data showed. “As overseas economies begin to weaken, it’s hard to project inflation hitting the BoJ’s 2 per cent target,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“The BoJ is likely to maintain its current policy at next month’s rate review,” though it could ponder additional easing at some point given the recent weak data, he said.

An index the BoJ focuses on — the so-called core-core CPI that strips away the effect of both volatile food and energy costs — rose 0.4 per cent in February, unchanged from the previous month’s gain.

Reuters