TOKYO Japan's core consumer prices slipped for a second straight month in the year to December, signaling the economy was still in deflation and piling more pressure on the central bank to adopt further stimulus steps to achieve its new inflation target.
Falls in consumer prices came after the Bank of Japan on Tuesday doubled its inflation target to 2 percent and decided to adopt an open-ended commitment to buying assets next year to revive the economy.
The 0.2 percent annual decline in core consumer prices in December matched a median estimate from analysts and followed a 0.1 percent decline in the year to November.
The so-called core-core inflation index, which excludes food and energy prices and is similar to the core index used in the United States, fell an annual 0.6 percent.
Many analysts expect Prime Minister Shinzo Abe will continue to call for bold stimulus steps by the central bank to help the economy pull out of nagging deflation, at least in the run up to an upper house election expected this summer.
"Upward pressure on prices was weak in December, but we can expect price declines to narrow as the yen has weakened and this will eventually push up oil and gasoline prices," said Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.
"The BOJ's additional easing won't start until next year, but we could see the BOJ consider some new steps once the government appoints the next BOJ governor and deputy governors."
Core consumer prices in Tokyo, available a month before the nationwide data, declined 0.6 percent in the year to January, compared with a 0.5 percent annual fall projected.
The BOJ's new economic forecasts showed this week core consumer prices will fall 0.2 percent in the current fiscal year and up 0.4 percent for the next fiscal year starting from April.
The world third-largest economy logged a record trade deficit in 2012 as Europe sovereign debt trouble and territorial spat with China dampened exports. But manufacturers' sentiment improved in January and it is expected to rebound further in coming months helped by recent softness in the yen and Abe's aggressive fiscal and monetary policy.
Analysts expect the economy will grow 1.8 percent in the new fiscal year as the new government's stimulus spending, expectations of further monetary policy easing and the yen's retreat will help the economy.
But many economists warn the stimulus could give the sluggish economy only a temporary jolt if the government fails to follow through with politically more difficult economic reforms.
(Editing by Edwina Gibbs)