Tokyo, May 31 (Bloomberg) -- Consumer prices in Tokyo, a bellwether for nationwide inflation, fell for the second month in May, suggesting that even a recovery in exports and production may not be enough to stem 2 1/2 years of price declines. Core consumer prices, which exclude fresh foods, fell 0.1 percent seasonally adjusted from April, the government's statistics bureau said. From a year ago, core prices dropped 1.1 percent in Tokyo in May. With domestic demand stagnating, the world's second-biggest economy is relying on exporters and overseas demand to lead it out of its third recession in a decade. At home, retail sales have fallen for four years on a year-ago basis, and 2 1/2 years of price declines are eating into corporate profits. ``There's still a ways to go until we see prices rising, as consumers aren't spending with wages falling.'' said Toshiyuki Hara, senior market economist at Mizuho Securities Co. A separate government report today showed that the jobless rate was unchanged at 5.2 percent in April. The economy shed 430,000 jobs, and an even larger number of people gave up looking for work.

Short Lived Recovery
Japan's exports, which have risen four straight months to April, probably helped the economy expand 1.5 percent in the quarter ended March 31, according to the latest Bloomberg News survey. The first expansion in a year may be short-lived as exports only account for 10 percent of the $4.2 trillion economy. ``Even if the decline in the economy has stopped, it is unlikely that Japan's economy will enter a self-sustaining recovery,'' Bank of Japan Governor Masaru Hayami said in a speech to business executives yesterday. The central bank has cut interest rates to zero and funneled trillions of yen into the market to stem price declines and promote growth. That money hasn't made its way into the wider economy because Japan's banks, which are shouldering 36.8 trillion yen in non-performing loans, have not increased lending in five years. Nationwide core consumer prices, which the Bank of Japan watches to set monetary policy, fell 0.9 percent in April from a year earlier. The figure hasn't risen in four years.