Japanese inflation fell back to zero in July, official data showed Friday, raising speculation that the central bank would unleash a fresh round of stimulus.
Core inflation, excluding volatile fresh food prices, was flat year-on-year, the internal affairs ministry said.
Lower fuel prices and other energy costs helped curb inflation, the data showed.
Household spending also fell 0.2 percent in July after declining 2.0 percent in the previous month, a separate report from the internal affairs ministry showed.
It was the second consecutive month of decline in family spending after a rise of 4.8 percent in May.
The May increase was the first rise since Japan hiked sales taxes in April last year to help pay down a huge national debt.
The sales tax hike, Japan's first in 17 years, slammed the brakes on consumer spending.
Speculation is rising that the Bank of Japan will be forced to expand its already huge monetary easing scheme to jack up prices and stoke growth in the world's third largest economy.
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