Japanese consumer prices fell a record 1.1 per cent in May compared with a year earlier, underlining the return of the deflation that has dogged the country since the bursting of its 1980s asset price bubble.

Last month’s fall in prices was the sharpest since Japan began issuing comparable statistics in 1971. Analysts said much of the decline was caused by lower energy prices and a change in petrol tax. However, the “core-core” consumer price index, which excludes energy, was down 0.5 per cent in May, and an extended period of deflation appears likely.