Tokyo, March 30 (Bloomberg) -- Consumer prices in Tokyo fell for the second straightmonth in March, suggesting no end to the nation's two-year bout of deflation. Core prices, which exclude fresh food, dropped 0.1 percent, seasonally adjusted, lastmonth from February, the government's statistics bureau said. Economists expected nochange. Prices fell 1.1 percent from a year earlier, matching last month's record decline. As economic growth slows and unemployment rises, retailers are cutting prices in a bidto attract shoppers, who have become more cost conscious. The government this monthsaid the economy is gripped by deflation, defined as a ``continuous fall in prices.'' In the long-term, ``the decline in domestic demand and the resolution of the bad-debtproblem should put further downward pressure on prices,'' Ron Bevacqua, a senioreconomist at Commerz Securities (Japan) Ltd., said before the figures were released. Deflation is expected to worsen if the government pushes banks to write off more badloans. More write-offs may lead to a rise in bankruptcies, which damages confidence anddrives prices down further. Food, rent and household goods led this month's decline in prices, according to theunadjusted month-on-month figures. The only prices to increase were for clothing andentertainment.
Nationwide Focus
Core nationwide prices rose 0.1 percent in February from the previous month, seasonallyadjusted. From a year earlier, prices dropped 0.6 percent, the 17th straight decrease. The central bank, which last week cut interest rates to close to zero, said it will keepborrowing costs at next to zero until the year-on-year change in nationwide core pricesstabilizes at or above zero percent. ``Market attention to the CPI should rise substantially going forward as it becomes aleading signal for monetary policy outlook,'' said Yoshito Sakakibara, a senior economistat Merrill Lynch Japan Inc. Still, economists expect consumer prices will keep falling at least into next year,suggesting rates won't rise any time soon. Some were surprised the Bank of Japanchose the consumer price index as its main gauge. The bank previously watchedwholesale prices as its key guide to deflation. The wholesale price index is compiled bythe BOJ and is regarded as more accurate. ``There are many problems in determining whether the CPI appropriately reflects changesin the price of goods and services,'' wrote Yasushi Okada, chief economist at CreditSuisse First Boston Securities (Japan) Ltd.
Suspect Data
The statistics bureau has been criticized for the reliability of its data. Most of the focushas been on the household spending survey, which is used to calculate the consumer-spending component of gross domestic product. Economists, business leaders and policy makers said the household survey isn'taccurate because it leaves out one-person households, doesn't sample enough peopleand is overly detailed. The CPI survey also doesn't include one-person households, which make up about aquarter of all households, and is on the rise. Also, the popularity of personal computersand mobile phones hasn't been captured since the components of the survey are revisedonce every five years. The next revisions are due this year, according to Okada. Tokyo prices are closely watched because initial estimates are published a month beforenationwide figures. Central Tokyo is home to about one in 10 Japanese, and about one infour live in the greater Tokyo area.