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Dim bond market view casts doubt on Japan's inflation goals

Economists, central bank also downgrade price-growth forecasts

A sign advertises low prices at a supermarket in Tokyo.

TOKYO -- Bond investors' outlook on price inflation has hit a 10-month low as companies remain leery of raising either wages or prices -- a stubborn legacy of Japan's decades of deflation that has frustrated even the central bank.

The 10-year break-even inflation rate -- the difference in yields between 10-year Japanese government bonds and their inflation-indexed equivalents -- fell to 0.341% on Wednesday, the lowest since October. This indicates little current demand for inflation-linked bonds, whose principal rises as prices grow, and implies dim expectations for inflation over the next decade.

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