The politically sensitive jobless rate also hit a record high 5.7 percent ahead of Sunday's election, which the opposition Democratic Party looks set to win. Analysts don't expect fresh BOJ action any time soon but some say the Democrats, if they take power, may ask the central bank to maintain very low rates to keep the economy afloat, or even call for more action down the road. "The BOJ was a little bit in denial in the first half of this year, but the CPI data may have them rethink their approach to policy," said Simon Wong, regional economist at Standard Chartered in Hong Kong. "There's no more talk of exit strategy. There may also be pressure to be more aggressive by saying they're committed to current policy until prices turn positive."
The BOJ, however, is unlikely to revert to full-blown quantitative easing and flood the banking system with excess cash as long as price falls narrow in the months ahead, as it doesn't believe deflation is likely to spiral out of control. Core consumer prices, which excludes volatile fresh food prices but includes oil costs, fell 2.2 percent in the year to July, matching a median market forecast and renewing a record for the third straight month, data showed on Friday.
