Japan inflation slows as oil price falls, keeps BOJ under pressure

TOKYO (Reuters) - Japanese annual core consumer inflation slowed for a fourth straight month in November due largely to sliding oil prices, highlighting the challenges the central bank faces in achieving its 2 percent inflation target.

Factory output unexpectedly fell and household spending remained weak, separate data showed, suggesting that any rebound in the economy from recession will be mild and fragile.

The core consumer price index (CPI), which excludes volatile fresh food but includes oil products, rose 2.7 percent in November from a year earlier, matching a median market forecast, government data showed on Friday.

Stripping out the effects of a sales tax hike in April, core consumer inflation was 0.7 percent, slowing from 0.9 percent in October and far below the Bank of Japan's 2 percent target.

Sharp falls in fuel and gasoline prices were largely behind the slowdown in inflation, the data showed.

Separate data showed industrial output unexpectedly fell 0.6 percent in November, down for the first time in three months and compared with a median estimate of a 0.8 percent gain.

In a glimmer of hope, however, manufacturers surveyed by the government expect output to rise 3.2 percent in December and increase 5.7 percent in January, the data showed.

BOJ Governor Haruhiko Kuroda stressed last week that Japan was on track to hit the price goal, shrugging off speculation that a recent plunge in oil prices would weigh on consumer prices and force him to ease policy again early next year.

But many analysts remain doubtful that the BOJ can meet its pledge of accelerating inflation to 2 percent in the next fiscal year beginning in April 2015.

The job market continued to tighten, reflecting the recovery.The jobless rate stood at 3.5 percent in November, flat from October, and job availability hit a 22-year high. The number of part-time workers exceeded 20 million for the first time since relevant data became available in 1984, suggesting that companies will have to raise wages to lure employees.

Consumers have yet to loosen their purse strings given slow wage growth. Household spending fell 2.5 percent in the year to November, against a market forecast for a 3.8 percent drop.

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