Prime Minister Shinzo Abe came to office in late 2012 and launched a growth plan - a mix of massive monetary easing, government spending and red-tape slashing. But economists are increasingly writing off the "Abenomics" spend-for-growth policy. Core consumer prices declined 0.4 percent on-year, the internal affairs ministry said. There was a forecast of a 0.3 percent fall among private economists.
Tokyo officials have blamed external factors, such as falling energy prices and uncertainty related to emerging economies, for their failure to achieve a promised two percent inflation target. Last month, the central bank said it expected to hit two percent inflation by March 2019 - four years later than its original target and the latest in a string of delays.
Under deflation, general price falls can discourage companies from making capital investments, while also slowing production. Deflation can also discourage spending by consumers, who might postpone purchases until prices drop further or save money, creating further pressure on businesses.