Tokyo-Consumer prices in Japan fell for the first time in more than three years last month, official data showed Friday, dragged down by the coronavirus pandemic and collapsing oil prices. Core prices in April, excluding volatile fresh food, slipped 0.2 percent from a year earlier, reversing a rise of 0.4 percent in March, according to the internal affairs ministry. It was the first drop in 40 months, the ministry said, and larger than a 0.1-percent drop predicted by economists surveyed by Bloomberg. Month-on-month, prices fell 0.5 percent following a drop of 0.1 percent in March. “Corona containment evaporated prices pressures,” said Capital Economics economist Tom Learmouth. Japanese inflation will “turn deeply negative over the coming months as services inflation and energy inflation continue to fall sharply,” he said in a note. Energy costs fell sharply year-on-year reflecting lower gasoline and oil products prices, while prices also dropped in the tourism industry hit hard by the outbreak of the new coronavirus.

Hotel fees and foreign travel prices sank while the cost of durable goods edged down as consumers stayed home amid the virus woes. School fees also fell. Government data on Monday showed Japan had dived into its first recession since 2015 in the first quarter of the year and some economists warned the worst was yet to come. Even before the virus outbreak, the central Bank of Japan had spent years struggling to achieve a two percent inflation target, as consumer spending remained slack despite the bank’s massive credit easing. The bank is holding an extra policy meeting Friday to discuss funding measures for smaller companies.But central bank chief Haruhiko Kuroda said last week that he did not expect Japan to be “trapped in a deflationary situation”. “Inflation rates in this fiscal year 2020 will be negative, but in fiscal 2021 and 22 inflation rates will be positive,” he said at a Financial Times forum.

Whereas Japan’s central bank on Friday offered hundreds of billions of dollars in additional lending to help small firms in the world’s third-largest economy struggling with the economic devastation wrought by coronavirus. The Bank of Japan expanded its loan programme by 30 trillion yen ($279 billion), bringing its total package of financial assistance to small and medium-sized firms to 75 trillion yen.

At an unscheduled meeting held to discuss the economic ramifications of the pandemic, the bank also extended the duration of the programme by six months until March 2021.

Japan was struggling from the effects of natural disasters and a hike in consumption tax even before the pandemic crippled the global economy. Data published on Monday showed Japan had dived into its first recession since 2015 in the first quarter, with most economists warning the worst was still to come. Adding to the Bank of Japan’s headaches, the country slipped back into deflation for the first time in more than three years, with prices falling 0.2 percent in April, according to data released earlier Friday.

The central bank aims to keep the inflation rate at around two percent but did not take any monetary policy action at Friday’s exceptional meeting. Last month, the BoJ fired off its monetary policy bazooka, offering unlimited purchases of government bonds and more than doubling its upper limit of corporate bond buys. It pledged again to maintain financial stability, “closely monitor” the impact of the coronavirus and vowed it will “not hesitate to take additional easing measures if necessary”.