* Aeon to cut prices for over 250 food, daily necessities
* Other retailers, carriers also undertaking price cuts
* Decisions underscore Japan's persistent deflation mindset
* Add pressure on BOJ to slash inflation forecasts
By Leika Kihara and Sam Nussey
TOKYO, April 11 Top Japanese retailer Aeon Co
is cutting prices for over 250 items ranging from milk
to daily necessities to lure cost-savvy shoppers, underscoring
the difficulty facing the central bank as it tries to spur
inflation and coax consumers to boost spending.
The Bank of Japan's 2 percent inflation target remains
elusive despite more than three years of massive money printing
intended to spur economic activity.
Aeon's move adds to headaches for BOJ policymakers, who
hoped a solid economic recovery will prompt firms to raise
prices and help maintain the bank's rosy price forecasts this
"The BOJ's view is that rising oil prices would help raise
consumer prices this year, but these price cuts could be a
headwind and might force the bank to lower its price outlook,"
said Shuji Tonouchi, senior market economist at Mitsubishi UFJ
Morgan Stanley Securities.
"We're still not in a situation where price increases for a
wide range of products are widely accepted."
Aeon said on Tuesday it will cut prices of 254 food items
and daily necessities at around 400 outlets nationwide by the
end of this month.
That would follow price cuts on more than 140 items in
March, a sign that many retailers consider discounts as the best
way to lure households into spending.
"For commoditised goods, it's important to provide them as
cheap as possible," said Soichi Okazaki, who oversees Aeon's
Faced with weak consumption, other retailers are also
embarking on price cuts to the dismay of the BOJ.
Seven & i Holdings Co said it will slash prices for
61 daily necessities at its 7-Eleven outlets this month.
Seiyu, a retailer under the arm of U.S. retailer Walmart
, cut prices for more than 200 products from February.
Retailers aren't alone. Some mobile phone carriers have cut
bills amid stiff price competition.
"The BOJ probably believes underlying price moves are
somewhat weaker than expected," said one official familiar with
the central bank's thinking.
The BOJ now projects core consumer inflation to hit 1.5
percent in the current fiscal year that ends in March 2018, and
accelerate to 1.7 percent in fiscal 2018.
The central bank will review its economic and price
projections at its policy meeting on April 26-27.
Japan has been mired in deflation for nearly two decades as
households sit on a pile of cash on uncertainty over the
The BOJ has deployed massive monetary stimulus since 2013 in
hopes of changing the public's perception that deflation will
persist, with little success.
Core consumer prices rose 0.2 percent in February from a
But a separate consumer price index that excludes the effect
of volatile fresh food and energy costs rose just 0.1 percent in
February, suggesting that weak consumption was preventing
companies from raising prices of non-energy items.
(Additional reporting by Minami Funakoshi and Ritsuko Shimizu;
Editing by Kim Coghill)