The core consumer price index includes petroleum products, but eliminates the price of fresh food with large fluctuations. This is the first time this figure has been negative since December 2016. In March, this index increased by 0.4%.

Low oil prices and containment measures to prevent pandemic spread have a significant impact on the world’s third largest economy. This figure was released just before the Bank of Japan (BOJ) announced a new lending program, targeting small and medium-sized businesses affected by Covid-19.

Lower prices in the wake of a pandemic pushed Japan’s economy into recession for the first time in 5 years, due to both declining consumption and business activities. This further drags down the BOJ’s inflation effort of 2%.

 "Demand may bounce back somewhat after the pandemic ends. However, prices will still go down in the next 2 months," said Yuichi Kodama, chief economist at Meiji Yasuda Research Institute. The gloomy economic outlook will make consumers tighten their pockets.

Japan has suffered nearly two decades of deflation, lasting until 2013. Thanks to the monetary easing policy of BOJ Governor Haruhiko Kuroda, this situation has just ended.

However, analysts believe that falling prices are hard to push BOJ to lower interest rates. "If the BOJ moves, the reason is because the yen is stronger than the price goes down. They are more sensitive to the exchange rate," Kodama said.