/www.bloomberg.com/ By Yoshiko Matsushita
Tokyo, Nov. 29 (Bloomberg) -- Consumer prices in Japan's capital were unchanged this month, as the government battles to turn around four years of deflation.
Tokyo core prices, which exclude fresh food, were unchanged from October, seasonally adjusted, a government report showed. Economists had expected a 0.1 percent decline. From a year ago, prices fell 0.7 percent.
The report also showed core prices nationwide fell 0.9 percent in October from the same month a year ago, extending a slide that began in April 1998. The Japanese central bank looks at the nationwide figure when it sets its target for interest rates, now at almost zero percent.
``This is the longest period of deflation Japan has experienced in the post-war period,'' said Seiji Adachi, an economist at Credit Suisse First Boston Japan Ltd. ``The end in price declines is nowhere in sight.''
Falling prices are hurting company profits. Businesses are being forced to charge less to lure shoppers amid record unemployment. Figures today also showed Japan's jobless rate rose to a record 5.5 percent in October.
Sony Corp., the world's second-largest consumer electronics maker, last week said it will cut the wholesale price of its PlayStation 2 video-game console to boost year-end sales. The console sells for about 24,800 yen. ($203).
Deflation
The report also showed nationwide prices, excluding fresh food, fell 0.3 percent in October from September, seasonally adjusted, as well as the 0.9 percent from October a year ago.
The central bank has said it will keep interest rates close to zero until monthly nationwide price figures start rising from year-ago levels, which hasn't happened since April 1998.
Prices won't start rising anytime soon, Bank of Japan Governor Masaru Hayami told parliament yesterday. ``It will take a little more time,'' he said. ``It's desirable for prices to stabilize just above the zero level.''
The central bank wants to eliminate deflation, because falling prices eat into corporate earnings and make it harder for companies to repay debt. The government estimate banks have more that $430 billion in bad loans that are restricting new lending and starving Japan's economy of money it needs to grow.