Japan's consumer prices fell at the fastest rate in nearly three years in March, by 0.3 per cent, as the markets reacted negatively to news that there would be no extra stimulus measures to help revive economic growth.

The official inflation figures represent the first decline in five months, the Ministry of Internal Affairs and Communications said Thursday, putting the drop in prices down to falling global energy prices.

The core consumer price index, which excludes fresh food, stood at 102.7 against a base of 100 for 2010, the ministry said.

The fall in prices recorded in March - indicating deflation - is far below 2-per-cent inflation goal set by the Bank of Japan.

Despite the decline, the central bank said Thursday it would not increase the already aggressive monetary easing measures that it introduced three years ago to combat years of deflation.

Japanese shares plunged more than 3 per cent after the announcement.

The benchmark Nikkei 225 Stock Average dropped by 3.61 per cent, to close at 16,666.05 after rising as much as 1.6 per cent in the morning amid expectations of action by the bank. The broader Topix index fell 43.75 points, or 3.16 per cent, at 1,340.55.

On currency markets at 3 pm (0600 GMT), the dollar traded at 108.90-91 yen, down sharply from Wednesday’s 5 pm quote of 111.20-21 yen.

The bank Thursday once again pushed back a deadline to achieve its inflation target to sometime in fiscal 2017 from its previous prediction in January of the first half of fiscal 2017.

The bank also cut its economic growth outlook to 1.2 per cent for the current financial year from the 1.5 per cent estimated three months ago amid growing concern that the yen’s recent rise would hurt exporters’ profits.

The yen has climbed about 9 per cent against the US dollar since the start of this year.

Prime Minister Shinzo Abe vowed to jump-start the world’s third-largest economy when he took office in December 2012, but his economic policies have failed to achieve long-term economic growth.

Japan’s economy shrank at an annual rate of 1.1 per cent in the October-to-December period for the second contraction in three quarters.

In January, the bank imposed negative interest rates to boost the flow of money through the economy, but it has not had the desired positive effect so far.

In other data released Thursday, household spending fell 5.3 per cent from a year earlier in March, marking the largest decline in a year.

Meanwhile, inflation-adjusted monthly wages inched up 0.3 per cent from a year earlier in March for the first rise in seven months, the ministry said.

The country’s unemployment rate edged down to 3.2 per cent in March for the first fall in two months, the ministry said.

The rate was down from a seasonally adjusted rate of 3.3 per cent in February.

Medical and welfare services added 270,000 jobs to employ a total of 8.07 million and the education industry saw an increase of 70,000 employees to 2.98 million, the Ministry of Internal Affairs and Communications said.

The availability of jobs - measured as the ratio of job offers per job seeker – rose to 1.3 in March, the Ministry of Health, Labour and Welfare said.

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