By Leika Kihara
TOKYO (Reuters) - Japanese wholesale prices fell 0.8% in September from the same month a year earlier, data showed on Monday, marking the seventh straight month of year-on-year declines and heightening the risk the country will slide back into deflation.
Squeezed mostly by soft global demand for commodities and Japanese machinery goods, the weakness in wholesale prices highlights the challenge Tokyo faces in cushioning the impact of the coronavirus pandemic on the world's third-largest economy.
The 0.8% fall in the corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, was bigger than a median market forecast for a 0.5% drop. It followed August's 0.6% year-on-year decrease.
Wholesale prices also slid 0.2% in September from August, marking the first on-month drop in four months, the data released by the Bank of Japan (BOJ) showed.
"With the global economy still reeling from the pandemic's pain, the pace of its recovery remains modest. That will weigh on Japan's wholesale inflation," a BOJ official told a briefing.
The drop in wholesale prices adds to headaches for the BOJ, which frets that sluggish consumption, particularly for services, will push consumer inflation further away from its 2% target.
Core consumer prices - the BOJ's key inflation measurement - fell 0.4% in August from a year earlier, marking their fastest year-on-year drop in almost four years.
The slew of soft price data may increase the chance the BOJ will cut its inflation forecasts at this month's rate review, when it also conducts a quarterly review of its projections.
Japan suffered its biggest economic slump on record in the second quarter as the pandemic crippled demand. Analysts expect any rebound to remain modest as fears of a second wave of infections weigh on consumption.
(This story corrects month-on-month figure to -0.2% from -0.1% in paragraph 4)
(Reporting by Leika Kihara; Editing by Kenneth Maxwell)