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Japan's corporate inflation expectations slump, keeps BOJ under pressure

[TOKYO] Japanese companies' inflation expectations slid in the three months to December, a central bank survey showed, a sign years of heavy money printing has done little to turn around the public's sticky deflationary mindset.

The data reinforces market expectations that subdued inflation will force the Bank of Japan to maintain its massive stimulus programme for a prolonged period, or even ramp it up, to hit its elusive 2 per cent price goal.

Japanese companies expect consumer prices to rise an average 0.8 per cent a year from now, lower than their projection three months ago, the BOJ's quarterly survey showed on Monday.

Three months ago, companies expected prices to rise 0.9 per cent over the next year.

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Firms polled by the BOJ, as part of its detailed "tankan" survey for December, also said they expect consumer prices to rise an annual 1.0 per cent three years from now and an annual 1.1 per cent five years from now.

The forecasts were both unchanged from three months ago.

Japan's annual core consumer inflation of 0.4 per cent in October was well below the BOJ's 2 per cent target, casting doubt on its view that a steady economic recovery will boost consumption and prod firms to pass on rising costs to households.

The economy is showing signs of weakness, with household spending falling in October for the first time in almost a year due partly to a sales tax hike that rolled out during the month.

But the BOJ is expected to hold off on expanding stimulus at its Dec 18-19 rate review, preferring to save its dwindling ammunition for due to the rising cost of prolonged easing such as the hit to bank profits from ultra-low rates.

The BOJ started the survey on corporate price expectations from the tankan in March 2014 to gather more information on inflation expectations, key to its current stimulus programme.