(MENAFN- AFP) The Bank of Japan on Tuesday said tumbling energy prices could push inflation to zero, marking another setback for Tokyo's attempts to conquer years of falling or stagnant prices and stimulate the economy.
While the central bank repeated its view that inflation expectations were "rising on the whole" -- and it held fire on launching fresh stimulus -- the commentary strikes another blow to efforts to reach a sustained 2.0 percent inflation level.
"The year-on-year rate of increase in the consumer price index.... excluding the direct effects of the consumption tax hike, is in the range of 0.0-0.5 percent," the BoJ said in a statement after wrapping up a two-day policy meeting.
But it added that inflation "is likely to be about 0 percent for the time being, due to the effects of the decline in energy prices".
The BoJ's inflation target is a cornerstone of Prime Minister Shinzo Abe's drive to resuscitate Japan's fortunes, dubbed Abenomics, which also includes big government spending and an overhaul of the country's highly regulated economy.
Tokyo's plan was to defeat years of crippling deflation that was blamed for holding back growth.
But efforts to stimulate spending faltered after the government raised the sales tax last year to help pay down Japan's enormous national debt.
That hammered consumer spending and led to a brief recession, while falling oil rates have pulled the carpet on energy-led price increases.
Japan limped out of contraction in the last quarter of 2014 with tepid 0.4 percent growth.
However, inflation in January rose just 0.2 percent from a year earlier, the lowest since a zero rate in May 2013, just after the BoJ unleashed a massive monetary easing programme.
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