(MENAFN- AFP) Japan's consumer prices dropped last month by the most in three years, dealing another big blow to Tokyo's faltering war on deflation, data showed Thursday.
The worse-than-expected fall -- 0.3 percent in March -- will turn up the heat on policymakers at the Bank of Japan who finish a closely watched meeting later in the day.
They are widely expected to unleash fresh easing measures to prop up Japan's weakening economy.
In another worrying sign for Tokyo's growth bid, separate data showed household spending remains weak, although factory output rebounded.
The tepid figures could be key to the BoJ's decision, which will likely come around midday (0300 GMT).
The world's third-largest economy has largely defied several years of Bank of Japan and government remedies aimed at boosting prices as well as broader activity.
Adding to concerns about the economy, deadly earthquakes this month that killed dozens of people in southern Kyushu also sparked factory shutdowns that threaten to slam the brakes on growth.
The economy shrank 0.3 percent in the last quarter of 2015 and there are concerns that the January-March GDP data will also come in weak.
The BoJ's options Thursday include expanding its huge asset purchase programme or fiddling with a negative rate scheme that it launched in January.
"We retain our forecast that the Bank of Japan will step up its asset purchases and cut the interest rate on excess reserves at its meeting later today," research house Capital Economics said in commentary.
The rate move -- which aims to encourage lending by essentially charging banks for storing some excess reserves in BoJ vaults -- was widely panned as a desperate move to save Prime Minister Shinzo Abe's growth drive, dubbed Abenomics.
Abe swept to power more than three years ago vowing to revive Japan's fortunes with a mix of policies centred on central bank monetary easing, targeted government spending and deregulation.
But his bid to power inflation has been hit by falling energy prices, coupled with recent robustness in the yen driving down the cost of imports.
On Thursday, markets will also be keen to see the BoJ's new inflation and growth forecasts.
The central bank has been ratcheting back its timeline for reaching a 2.0 percent inflation target, which was unveiled along with a huge asset-buying plan in early 2013.
The BoJ's moves are a cornerstone of Abenomics, which has struggled to boost Japan's lukewarm economy despite plenty of fanfare.
In a sign of growing unease over Japan's economy, the International Monetary Fund this month cut its growth forecast for the country, saying GDP would shrink next year as a planned sales tax rise tightens consumer spending.
The IMF also said that deflation -- a persistent and debilitating decline in prices that weighed on the economy for years -- could return to Japan.
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